China’s three major airlines—Air China, China Southern Airlines, and China Eastern Airlines—enjoyed record passenger numbers in the first half of 2018, and all three airlines expect the trend to hold in the second half of the year as Chinese tourists continue to travel. Many predicted that Chinese airlines would carry about 600 million passengers this year, according to Routeonline, but they have already transported some 304 million during the year’s first half. And there are reasons to expect that coming months will bring a spurt in outbund travel, as the carriers smartly cater to the demand with new routes like Guangzhou-Rome.

The airlines’ first-half reports covered the Lunar New Year and the beginning of the summer travel season, as well as three-day holidays like International Labor Day, Qingming Festival, and Dragon Boat Festival. The second half will cover the busier part of the summer travel season, which generally includes student study tours, as well as the back-to-back holidays Mid-autumn Festival and National Day, which many travelers combine into one long holiday. Online travel agencies have already predicted that travelers who took added time off to combine the fall holidays are more likely to travel abroad, and with many flights booked well in advance of the holidays, remaining seats were selling at a premium for those who made last-minute reservations.

China Southern, which released its interim results on September 25, recorded first-half operating revenue of $9.8 billion (RMB 67.5 billion) with more than 67 million passenger trips. Domestic trips accounted for 85 percent of passenger traffic on the airline in the half, but revenue from international flights increased 18.5 percent year-on-year to nearly $2 billion (RMB 14 billion) and accounted for 23 percent of revenue.

China Southern’s revenue from international flights increased 18.5 percent year-on-year in the first half of 2018

The company noted that their Guangzhou-Sanya-London route will run in the second half, and it also plans to open a Guangzhou-Rome route. In addition, it expects to increase capacity on its routes between Guangzhou and Australia, Canada, and Southeast Asia.

Meanwhile, China Eastern—which released its interim results at the end of August—recorded a $7.9 billion (RMB 54.4 billion) in revenue in the first half, up more than 13 percent year-on-year. About 29.5 percent of its revenue in the half was from international flights.

As with the other airlines, Air China saw its revenue increase in the first half of 2018, with international flights accounting for almost 28 percent of revenue. The airline recorded $9.35 billion (RMB 64.2 billion) in operating revenue, up nearly 12 percent year-on-year, but its operating expenses increased more than revenue at nearly 13.5 percent year-on-year.

Nearly a third of Air China revenue came from international flights

As China’s airlines prepare for another record year with increased passenger traffic and revenue, some industry watchers may wonder when the market will level off. Considering Boeing’s forecast that China will need 7,690 new aircraft by 2037 to meet industry demand, it seems there is still room for growth.

Binglun He contributed to this story.

Categories

Corporate Earnings