Summary of Key Points
The performance of domestic airlines listed in the first half of the year varied significantly: the three major state-owned airlines incurred a total loss of over 8 billion yuan, with most airlines either in the red or experiencing a decline in profits; however, low-cost airlines (such as Spring Airlines) continued to be profitable, while airports and cargo airlines generally made money. The main reason for the turnaround in performance was the sharp rise in oil prices in the second quarter, which eroded profits. The ability to control costs became a critical factor determining an airline's financial outcome. Whether airlines can turn losses around in the second half of the year depends on oil price trends, cost control, and the expansion of passenger sources. The recovery of international routes is key to long-term profit growth.
I. A Chasm in Performance Between Airlines in the First Half of the Year: Major Losses for Major Airlines, while Low-Cost Airlines Remained Profitable
Most airlines had a difficult time in the first half of the year. The three major state-owned airlines (CAAC, East China Airlines, and China Southern Airlines) lost a combined total of over 8 billion yuan, and mid-sized airlines like Shenzhen Airlines and Shandong Airlines also suffered losses of over 1 billion yuan. In contrast, low-cost airlines performed well. Spring Airlines was the most profitable passenger airline, earning 59.44 million yuan in the second quarter; Jixing Airlines' subsidiary, Nine Yuan Airlines, and China Eastern Airlines' subsidiary, China United Airlines, also reported profits.
It's worth noting the "special situation" of Hainan Airlines: its net profit increased by three times year-on-year, but this was mainly due to "incidental income" (such as the recovery of bad debts amounting to 202 million yuan). Excluding this incidental income, its actual profit was only 29.2 million yuan, which means it had turned losses but not truly made a profit.
II. The Surge in Oil Prices as the Main Reason for the Performance Turnaround: Profits from the First Quarter Were Completely Eroded in the Second Quarter
Airlines collectively made profits in the first quarter due to falling oil prices and exchange gains. However, the situation reversed sharply in the second quarter, with many airlines incurring huge losses due to the soaring oil prices. Since March, the price of aviation fuel has risen from 5,600 yuan per ton to 9,800 yuan per ton, an increase of 75%! Aviation fuel accounts for more than 30% of an airline's costs, and the rise in prices significantly eroded profits. The three major airlines were the most affected, as they operate large fleets with numerous routes and consume more fuel, resulting in losses of over 10 billion yuan in the second quarter. Private airlines, being smaller and more flexible (for example, by reducing high-fuel-consuming routes), also saw a significant decline in profits.
III. Why Are Low-Cost Airlines More Resilient? Cost Control Is the Secret to Survival
The key to the success of low-cost airlines is their ability to save money:
- Use of a Single Aircraft Model: Spring Airlines exclusively uses Airbus A320 aircraft, which result in lower maintenance and training costs compared to the three major airlines, which operate a variety of aircraft models with separate management for parts and personnel.
- Direct Sales: They sell tickets through their official websites and apps, avoiding commissions to travel agencies, which saves a considerable amount of money.
- Aggressive Reduction of Non-Fuel Costs: Spring Airlines reduced their non-fuel costs by 4.8% year-on-year, which offset some of the impact of rising oil prices. As a result, their "cost per seat-kilometer" (the cost incurred to transport each passenger per kilometer) was 30% lower than that of the three major airlines, giving them a clear advantage under high oil prices.
IV. Airports and Cargo Airlines Profited Despite the Turmoil: A Contrasting Situation Compared to Passenger Airlines
Unlike passenger airlines, most listed airports (such as Shanghai Airport and Baiyun Airport) and cargo airlines (such as Sinotrans Airlines) were profitable in the first half of the year. The reason is simple: airport revenues come from various sources (including duty-free shops and ground services), and cargo demand is relatively stable, making them less affected by oil price fluctuations.
V. Can Losses Be Turned Around in the Second Half of the Year? Oil Prices Are the Key, and Summer Travel Didn't Meet Expectations
The task of turning losses around in the second half of the year is challenging:
- High Oil Prices: Although oil prices dropped by 18% in July, they are still 50% higher than the same period last year and 3,000 yuan per ton higher than at the beginning of the year, putting continued pressure on airlines' finances.
- Poor Summer Travel Performance: Passenger volumes increased in July, but ticket prices were lower than in previous years, resulting in lower profits.
- Oil Prices Are Crucial: Experts suggest that if oil prices return to a normal range (around 5,200-6,100 yuan per ton), the three major airlines might be able to turn profits in the second half of the year.
- Long-Term Opportunities: The slow delivery of new aircraft globally has led to a shortage of capacity. Once international routes (such as those between China and the United States or Europe) recover, airlines could earn more due to higher ticket prices.
In summary, if airlines want to reverse their losses in the second half of the year, they need to wait for oil prices to drop and then focus on cost control and expanding their customer base, especially through international routes.