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China’s “Big Three” carriers tipped to benefit from swift domestic growth
November 18th 2021
The well capitalised balance sheets and strong domestic exposure of China’s “Big Three” airlines make them advantageously positioned to make the most of strong post-COVID growth, a new analysis by HSBC Global Research writes. Read More » HSBC analyst, Parash Jain, was bullish in the report about cumulative October travel figures from China Eastern Airlines, China Southern Airlines and Air China that are showing an improvement in passenger traffic and load factor. Jain said the combined figures revealed the airlines’ domestic passenger traffic in revenue passenger kilometres recovered in October to 77% of 2019 levels with a 69% load factor. This was an increase over September’s figures of passenger traffic at 73% of 2019 levels and a 67% load factor plus a substantial rally from the August air traffic collapse. Domestic capacity for the three airlines was 94.5% of 2019 levels, but international travel remained lacklustre, the analysis said. It predicted the domestic market would ramp up swiftly when the COVID-19 situation is controlled. “We are optimistic pent-up demand for travel will quickly bounce back once the pandemic subsides, supporting the recovery of the domestic market,”’ it said. “Despite sporadic outbreaks of COVID-19 across China in recent months, domestic RPK were quick to rebound following each outbreak as evidenced by the sequential recovery in September to +73% RPK month-on-month (m-o-m) and October (+11% RPK m-o-m). Every subsequent small COVID-19 outbreak in mainland China has had a gradually smaller impact on overall travel sentiment, as society in general has moved towards dynamic COVID-19 controls.” The analysis said the Big Three were best positioned to grow from the gradual reopening of international travel. It suggested this could be quicker than forecast due to increasing vaccination and other developments, allowing the airlines to redeploy their excess capacity from domestic routes. However, it said the airlines did not expect the country’s borders to reopen ahead of the Beijing Winter Olympics in February next year. There also was a note of caution about the near-term risk to the industry from ongoing COVID-19 cases in China.
