Air China Turns Profit in Third Quarter

On October 26, Air China released its Q3 2023 financial report, showing the airline has made its first profitable quarter since 2020. The airline has made RMB4.2Bn ($0.59Bn) in profit during Q3 and has cleared all losses in the first half of 2023 (1H23). This is a major milestone for the airline post-pandemic, and major efforts have been invested to ensure such a result. Projecting to the end of 2023, although Air China has laid a solid foundation for its FY2023 performance, a profitable fiscal year 2023 (FY2023) still needs endeavors to achieve.

Results

In the previously reported half-year report published by the airline, the RMB3.45Bn ($0.48Bn) losses compared to the same time last year have been significantly reduced thanks to the release of China’s COVID-19 control measures, and the recovery of the Chinese economy since the beginning of 2023. Q3 is the traditional rush season for aviation markets as it covers the summertime. The public expects Air China to significantly reduce their losses with Q3 performance, and everyone is surprised that the carrier was able to turn the situation upside down to profit.

Operations

During Q3, Air China invested major efforts to ramp up capacity and occupancy. For Air China’s routes between its major Hubs, such as Beijing, Shanghai, Guangzhou, Shenzhen, Chengdu, and Hangzhou, it rolled out a new program called Air China Express, which Air China will schedule frequent flights every half-hour, and allows business travelers to change flights more easily.

To increase operational efficiency, Air China found the opportunity to further squeeze the daily usage of its wide-body jets by triangulating their routings. For instance, an Air China Boeing 777-300ER on a summer schedule will fly its first four-hour leg from Beijing to Urumqi, China, which was a major tourist destination during summer; then, it will fly another five-hour to Guangzhou, carrying the tourists from South of China back home; after that, the 777 make its trip back to Beijing with a three-hour flight, and finally, end its day on a red-eye international flight to Frankfurt.

To make such a route operable, Air China invested in previous years in setting up subsidiaries and bases in the Chinese provinces of Xinjiang and Guangdong. By breaking the traditional City A – City B – City A scheduling, the carrier is able to increase the daily usage of its fleet and put sufficient capacity to demands.

Economy

During Q3 of this year, many believed that China was experiencing a sluggish recovery from its COVID-19 impacts on its economy. From metrics, that may be so, however, the travel demand was still high since most Chinese people have significantly cut down their travel during the past three years. This year, with all the restrictions lifted, some previously unfulfilled demands move to 2023. This was suggested by the high demand during the quarter, even under a record-high average airfare.

Q4 and Beyond

Without a doubt, Air China is striving for a profitable 2023. Though the past quarters have laid a solid foundation for the carrier to do so, it may still be a challenging task to break even for the entire year as Q4 is traditionally the off-season for both tourism and business travels. However, the carrier is also investing in attracting more international students and convention guests to fly with Air China, as Q4 covers Western holidays, and multiple major trade conventions take place in China during Q4. Finally, Air China is also putting more work into its regional jet fleet of COMAC ARJ21 to fulfill routes with less traffic, making sure its network can cover as much as possible, and doing so with the highest efficiency.

Overall, the carrier handed in a top-notch result for Q3, and its performance for the year 2023 will continue to be focused on by the public. We will continue to observe the actions taken by Air China to improve its efficiency and its profitability.

• Author
• Recent Posts

Lei Yan

Lei is from Inner Mongolia, China, and now lives in Guangzhou. He grew up in an aviation family, where his passion began. During his time at Penn State University, he studied Industrial Engineering specializing in operations research, and he graduated with an honor’s thesis on airport gate assignment optimization. Now, he is a Purchasing Manager with Procter & Gamble. In his free time, he enjoys flying, reading, and wandering around the city.

Latest posts by Lei Yan (see all)

• Analysis: Chinese Carriers’ Future Widebody Orders - April 15, 2024
• New Wave of U.S.-China Routes: What’s Next? - March 20, 2024
• Air China to Order and Receive Six COMAC C919s in 2024 - December 25, 2023