BEIJING: China’s biggest airline has reported less severe losses in the second quarter as domestic travel picks up with the coronavirus outbreak brought largely under control.
The country where the disease first emerged last year has reported no new deaths since May — allowing for a tentative return of business and tourist travel within its borders, even as the virus wreaks havoc elsewhere.
China Southern Airlines, the nation’s largest carrier in terms of passenger numbers, posted losses of 2.9 billion yuan ($422 million) in April-June, compared with 5.3 billion yuan in the first quarter from January to March.
“The Covid-19 pandemic has exerted a long-term and profound impact globally,” the company said in its results announcement, predicting further uncertainty.
But “the aviation market in China will be the first to rebound, and the overall trend of recovery and development is prosperous,” it said, noting a “strong potential demand for passenger travel” if the virus is suppressed.
Flag carrier Air China reported total first half losses of 9.4 billion yuan, with the second quarter loss of 4.6 billion only slightly lower than 4.8 billion posted in the first quarter. The country’s second largest carrier China Eastern Airlines bucked the trend, however, with larger losses in April-June of 4.6 billion yuan than the 3.6 billion in January-March.
This was thanks to an aggressive pricing policy that drew travelers back to the airline but resulted in lower margins.
About 10 Chinese airlines have launched unlimited-flight deals to boost demand since the virus was stamped out through strict lockdowns, contact tracing and close monitoring of neighborhoods.
“This is a highly significant moment because it is the first time, since the start of the Covid-19 outbreak, that a major segment of the aviation market anywhere in the world has returned to pre-pandemic levels,” said Olivier Ponti, vice president of travel analysts ForwardKeys.
“The crunch question is whether heavy discounting will still be needed to maintain the recovery, or whether the industry will return to profitability during the upcoming Golden Week holiday in October,” he said.
As the Chinese economy continues to recover from the coronavirus crisis, a Reuters poll showed that China’s factory activity likely expanded at a slightly faster pace in August, fueled by rising infrastructure spending and improving global demand.
The official manufacturing Purchasing Manager’s Index (PMI) is expected to pick up moderately to 51.2 in August from July’s four-month high of 51.1, according to the median forecast of 16 economists polled by Reuters.
China’s vast industrial sector is steadily returning to the levels seen before the pandemic paralyzed huge swathes of the economy early this year.
Pent-up demand, stimulus-driven infrastructure and surprisingly resilient exports have been the main drivers propelling the rebound, but private consumption is lagging as consumers remain cautious about spending.
Profits at China’s industrial firms last month grew at the fastest pace since June 2018, official data showed on Thursday.