Chinese Airlines Warn of $7 Billion in Losses After Roller Coaster 2021

The Covid-19 pandemic took a financial toll on Air China, China Eastern Airlines, and China Southern Airlines in 2021 despite early optimism that the Chinese domestic market could fully recover during the year.

In separate notices to the Hong Kong stock exchange Friday, Air China warned of a 14.5-17 billion yuan ($2.3-2.7 billion) loss in 2021. China Eastern forecast an 11-13 billion yuan loss, and China Southern an 11.3-12.8 billion yuan loss.

All three carriers pointed fingers at the pandemic for their poor financial performance during the year. Air China cited repeated "fluctuations" in domestic traffic amid changing Covid-19 restrictions that made it "increasingly difficult for [Air China] to improve its operating performance." While China Southern cited a "sluggish" domestic travel recovery, and China Eastern the continued near-total closure of China's borders.

Data from IATA show monthly domestic Chinese passenger traffic measured in revenue passenger kilometers (RPKs) gyrating in a way that, when graphed, looks something akin to a roller coaster. After ending 2020 near 2019 traffic levels, the market fell off to down around 50 percent in February before surpassing levels last seen two years earlier from March through May. Traffic numbers remained below 2019 levels for the balance of the year but with additional peaks and valleys. Overall, Chinese domestic traffic was down on average 24.4 percent year-over-two-years in all of 2021.

Each carrier's individual data prove that out. China Southern — the largest domestic carrier of the three — carried 24 percent fewer RPKs last year than in 2019, China Eastern 25 percent less, and Air China 27 percent less, data from each carrier show.

And, as China Eastern noted, all three airlines have been hobbled by China's border closures. The country's flag carrier Air China carried just 3 percent of its 2019 international passenger traffic last year. Rising oil prices and exchange rate fluctuations also hit the carrier's 2021 results.

China is not expected to reopen to international travelers in a significant way until at least 2023. This leaves its airlines focused on the domestic market for another year. But internal travel restrictions to keep Covid-19 at bay could produce the same demand fluctuations seen in 2021.