Chinese Airlines Confident of ‘Triumph’ as Global Carriers Warn of Unprecedented Losses

(Bloomberg) -- China’s airlines struck a defiant tone in their annual results, saying they see only a short-term hit from the coronavirus outbreak, despite unprecedented disruptions and expected losses for the global aviation industry.

Air China Ltd. sounded the most optimistic of the so-called big three airlines, saying the country’s economy remains on a steady growth path with a positive long-term outlook, helped by government strategies such as the Belt and Road initiative and Greater Bay Area that will strengthen regional links and change the aviation market. “We will surely be able to triumph over this battle of containing the pandemic,” Air China said in a statement Tuesday.

“China’s aviation market demand will remain strong in the long run, and the market potential is huge.” -- Air China

China Eastern Airlines Corp. and China Southern Airlines Co. acknowledged that the virus has disrupted travel and the outlook remains uncertain, but they stopped short of issuing dire forecasts.

The trio’s results announcements coincided with a warning from the International Air Transport Association, which said carriers worldwide will burn through as much as $61 billion in the second quarter and some could run out of cash. Airlines from Australia to the U.S. are operating only a handful of flights, as government restrictions on travel lay waste to demand. IATA warned last month that airlines face $252 billion in revenue losses this year.

“China’s prevention and control measures have achieved positive results, and the most difficult and arduous stage has passed.” -- China Southern

The overall capacity of airlines in China since Jan. 20 has slumped more than 50% to 8.4 million seats a week, according to OAG Aviation Worldwide. However, the pace of decline has steadied since the initial plunge, with only a 3.4% drop from the week ending March 9 to March 30, the flight-data provider said. Meanwhile, cuts are accelerating in other markets, including the U.S., which suffered a 21% slide last week alone. India’s capacity tumbled 71%.

In another sign of confidence, both Air China and China Eastern said they’d pay a dividend for 2019, in contrast to companies elsewhere, including financial giants such as HSBC Holdings Ltd. and Barclays Plc who’ve scrapped theirs to shore up liquidity. China Southern didn’t propose a final dividend for 2019, but said there was adequate funding for working capital and spending requirements for the 18 months from the end of last year.

Like the other two major airlines, China Eastern said slower global economic growth had weighed on its results last year. Yet its passenger numbers rose 7.5% from 2018 to 130 million on a network reaching 1,150 destinations in 175 countries. China Southern flew about 152 million passengers in 2019 and Air China carried 115 million.

Shanghai-based China Eastern, which released its results late Tuesday, said the coronavirus has put downward pressure on the world economy and presented global aviation with “tremendous challenges” as travel restrictions reduce demand and leave some airlines struggling for survival. Still, the company said it responded quickly to the outbreak by suspending or adjusting flights in a timely manner and following government and regulatory policies.

“COVID-19 may catalyse new changes in the scale of the global air transport industry.” -- China Eastern

Shares of the three airlines fell in Hong Kong on Wednesday. Air China slid 1.8%, China Southern lost 2.4% and China Eastern dropped 2.3%. They were more mixed in Shanghai, with Air China gaining 1.7%, China Southern slipping 0.2% and China Eastern little changed.

©2020 Bloomberg L.P.