Chinese airlines may not be profitable even as domestic travel rebounds, says analyst
China’s air passenger volume could jump by 10% year-over-year during a critical holiday season that begins later this week — but that won’t help Chinese airlines turn profitable until international travel resumes, said an analyst. Chinese airlines, like their peers globally, have been hit by a slump in travel as countries around the world closed borders and limit movements of people to contain the spread of the coronavirus. Domestic travel in China has rebounded strongly as the country recovers from the pandemic, but Chinese airlines will continue to feel the pain, said Ivan Su, equity analyst at Morningstar. “Without this international demand, it’s unlikely according to our analysis that Chinese airlines would be able to go back into profit territory,” Su said Tuesday. “The overall theme for Chinese carriers is to curb losses during this period instead of making profits,” he said. “Until we see major a pickup in yield, we don’t really think Chinese airlines will be able to generate much profits off domestic routes for long.” Su added that he did not expect international passenger volumes into China — which has been down about 95% now from a year ago — to pick up strongly this year. However, the Chinese have become keen travelers within their own country as international borders remain largely shut. In August, domestic air passenger volumes in China were 20% lower from a year ago. In the later weeks of September, they were higher as compared to a year ago, said Su. “Heading into the Golden Week, I wouldn’t be surprised if we see a 10% increase year over year in domestic passenger volume,” said Su, referring to week-long Mid-Autumn Festival public holiday starting on Thursday in China. Many Chinese airlines will struggle to generate profits this year partly due to unlimited flight passes that they have launched, said Su. Unlimited flight passes are prepaid tickets that are purchased for a flat fee that allow any number of trips within a specified time period.<br/>
https://portal.staralliance.com/cms/news/hot-topics/2020-09-30/general/chinese-airlines-may-not-be-profitable-even-as-domestic-travel-rebounds-says-analyst
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Chinese airlines may not be profitable even as domestic travel rebounds, says analyst
China’s air passenger volume could jump by 10% year-over-year during a critical holiday season that begins later this week — but that won’t help Chinese airlines turn profitable until international travel resumes, said an analyst. Chinese airlines, like their peers globally, have been hit by a slump in travel as countries around the world closed borders and limit movements of people to contain the spread of the coronavirus. Domestic travel in China has rebounded strongly as the country recovers from the pandemic, but Chinese airlines will continue to feel the pain, said Ivan Su, equity analyst at Morningstar. “Without this international demand, it’s unlikely according to our analysis that Chinese airlines would be able to go back into profit territory,” Su said Tuesday. “The overall theme for Chinese carriers is to curb losses during this period instead of making profits,” he said. “Until we see major a pickup in yield, we don’t really think Chinese airlines will be able to generate much profits off domestic routes for long.” Su added that he did not expect international passenger volumes into China — which has been down about 95% now from a year ago — to pick up strongly this year. However, the Chinese have become keen travelers within their own country as international borders remain largely shut. In August, domestic air passenger volumes in China were 20% lower from a year ago. In the later weeks of September, they were higher as compared to a year ago, said Su. “Heading into the Golden Week, I wouldn’t be surprised if we see a 10% increase year over year in domestic passenger volume,” said Su, referring to week-long Mid-Autumn Festival public holiday starting on Thursday in China. Many Chinese airlines will struggle to generate profits this year partly due to unlimited flight passes that they have launched, said Su. Unlimited flight passes are prepaid tickets that are purchased for a flat fee that allow any number of trips within a specified time period.<br/>
