Air China, China Southern post narrower quarterly losses but fares stay low

BEIJING/SYDNEY, Aug 28 (Reuters) - Air China and China Southern Airlines on Friday reported narrower losses in the second quarter, as domestic travel demand slowly picked up from COVID paralysis, but low fares took a toll on revenue.

Guangzhou-based China Southern Airlines said its net loss narrowed to 2.9 billion yuan ($422.5 million) in the second quarter from 5.3 billion in the January-March period.

For the first half, China Southern recorded 8.2 billion in losses, compared with a profit of 1.69 billion during the same period last year.

Beijing-based Air China, the country’s flag carrier, said its net loss dropped slightly to 4.6 billion yuan in the second quarter from 4.8 billion in the first three months, partly due to its investment in Hong Kong carrier Cathay Pacific Airways which posted a record first-half loss amid the pandemic.

Air China made a 9.4 billion yuan loss in the first half, compared with a 3.14 billion profit a year before.

However, Shanghai-based China Eastern Airlines, which has been heavily discounting fares to attract more flyers, saw losses deepen. Its net loss reached 4.6 billion yuan in the second quarter, up from 3.9 billion in the first quarter.

The carrier said daily flight numbers had recovered to more than 95% of pre-COVID levels, but many analysts remain doubtful that increased traffic will lead to profit-making any time soon.

Aggressive price promotions rolled out since June have been a shot in the arm for travel demand. China Eastern said earlier this month its “Fly as you wish” weekend travel deal launched in late June helped boost the number of passengers by 39.05% in July compared with the previous month.

ForwardKeys, a travel analytics company, predicted on Thursday that domestic air travel in China would reach a full recovery by the start of September.

In the second week of August, domestic arrivals at Chinese airports reached 86% of 2019 levels, and bookings hit 98%, with most being for travel in mid to late August, ForwardKeys data showed.

“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,” said Olivier Ponti, VP Insights at ForwardKeys.

International markets have yet to show visible signs of recovery as strict flight curbs from China’s aviation regulator on incoming passengers remained largely in place.

$1 = 6.8644 Chinese yuan renminbi Reporting by Stella Qiu in Beijing and Jamie Freed in Sydney Editing by David Holmes