China’s Weak Economy Leads to Profit Decline for Three Major State-Owned Airlines in Q3

Beijing International Airport is far less bustling than before the pandemic, becoming much quieter. (Video screenshot)

October 31, 2024 - The ongoing sluggishness of China’s domestic economy has driven passengers to seek cheaper ticket prices. Although passenger traffic hit a historic high this summer and planes were fuller than last year, China’s three major state-owned airlines still reported a decline in third-quarter profits.

Data from FlightMaster, an aviation data company based in China, shows that in July and August this year, the average domestic ticket price in China was 17% lower than last year and 1% lower than in 2019. FlightMaster also noted that international ticket prices were 25% lower than last summer and 12% lower than in 2019.

Another aviation data company, ForwardKeys, reported that from January to September this year, the price of outbound tickets from China dropped by 39% compared to the previous year.

The drop in ticket prices has eroded airline profits.

On Wednesday (October 30), Beijing-based Air China announced that its third-quarter net profit was 4.14 billion yuan (approximately $581.34 million), down from 4.24 billion yuan in the same period last year.

China Eastern Airlines (CEA) reported on Wednesday that its third-quarter net profit was 2.63 billion yuan, a 28.2% decrease from the same period last year.

China’s largest airline, China Southern Airlines (CSA), stated on Monday (October 28) that despite strong demand in the aviation market, its third-quarter net profit declined by 23.9% year-over-year, to 3.19 billion yuan.

In September, China’s civil aviation regulatory agency reported that the number of passengers in July and August was 12% higher than the same period last year and 18% higher than pre-pandemic levels.

Data from CSA indicated that the company’s capacity in the third quarter increased by 11% compared to last year, and planes were on average fuller than they were last summer. However, third-quarter operating revenue grew only 4.6%, indicating a decline in ticket prices.

In a recent report, aviation data and consulting company Ishka stated that the significant difference between capacity growth and net profit growth indicates that China’s situation is more severe than the economic slowdown seen in other regions.

Ishka wrote in the report that although the ongoing recovery in capacity since the pandemic has at least helped airlines recover from the unsustainable losses incurred during the pandemic, these companies have not been immune to the negative effects of China’s economic slowdown.

China’s largest low-cost private airline, Spring Airlines, returned to profitability after the pandemic earlier than its full-service competitors CSA, CEA, and Air China. However, it also saw a decline in third-quarter profits, with Spring Airlines reporting on Wednesday that its net profit fell by 32.4% year-over-year, to 1.2 billion yuan.

In the busy summer months of the third quarter last year, the three major airlines achieved their first quarterly profit since 2019, but they fell back into losses during the winter off-season. In March this year, Air China, CEA, and CSA each disclosed their 2023 annual reports, revealing a total loss of over 13.4 billion yuan for the three major state-owned airlines last year.

Despite efforts by the Chinese government to stimulate economic growth through economic stimulus plans, Chinese consumers are restraining spending due to the ongoing real estate crisis and high youth unemployment.

The pressure of job scarcity impacts many people in China. The number of applicants for the 2025 Chinese National Civil Service Exam hit a new record, reaching 3.25 million, an increase of over 340,000 from last year. Some positions are highly competitive.

One of the most notable examples is the position of first-level officer or below in the Liaison Department of the China Vocational Education Society, which has only one opening, but 16,702 applicants have signed up, making the competition ratio a staggering 16,702:1. This topic has sparked heated discussions online.

(This article references reports from Reuters)

Responsible Editor: Lin Yan