Air China, China Southern stay in the red amid travel controls

Two of China’s biggest airlines posted steep third-quarter losses on Friday as the country’s stringent zero-COVID policy reduced domestic demand and kept international flights at a tiny fraction of pre-pandemic levels.

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Air China Ltd and China Southern Airlines reported a combined 14.8 billion yuan ($2.04 billion) third-quarter loss, taking their total losses this year to 45.7 billion yuan.

The fourth-quarter outlook remains dim after a lacklustre week-long National Day holiday in October that saw the number of trips fall 18.2% from last year, according to government data.

The government advised citizens to stay put during the holiday, a popular domestic and international travel period before the pandemic, to curb the spread of COVID-19, even though case numbers in China are small by global standards.

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Beijing-based Air China, the country’s flagship carrier, reported a third-quarter loss of 8.7 billion yuan, narrower than a loss of 10.5 billion yuan in the second quarter when the country experienced major travel disruptions, including a lockdown in Shanghai.

Guangzhou-based China Southern Airlines posted a third-quarter loss of 6.1 billion yuan, better than a 7.0 billion yuan loss in the previous quarter.

Rival Shanghai-based China Eastern Airlines is scheduled to report earnings on Sunday.

The three state-owned airlines are resuming some international routes this month after the government in May requested an increase to facilitate travel by staff members at international companies.

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The Civil Aviation Administration of China said on Wednesday that international flights would double for the October-March winter schedule season relative to the prior year to 840 one-way flights per week.

Chinese airlines on average flew 35 international flights a day in September, up 24.5% from August, according to aviation data provider Flight Master. However, the international market remains extremely depressed with current flight numbers at around 5% of 2019 levels.

Most of the additional flights were on Asian routes, with long-haul flights to Europe and North America remaining scarce and expensive.

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China Eastern said on Oct. 17 that it plans to double weekly international flights to 108 by the end of the month, including the return of routes like Kunming-Bangkok and Hangzhou-Tokyo.

A research note issued by CITIC Securities this month forecast international flights would reach 10% of 2019 levels by end of the year. ($1 = 7.2461 Chinese yuan renminbi)

Source: Reuters

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