According to Sina Finance, Song Zhiyong—the new director of the Civil Aviation Administration of China (CAAC), revealed in a July 8 meeting that the aviation industry hit a low in the first half of 2022, with an overall loss of $16 billion.
This record loss contradicts the plans and hopes of China.
In January, China planned to recover the aviation sector, turning previous losses into profits in 2022. Under a 33-point stimulus package, airlines would receive significant aid from the central government, including emergency loans of $22.4 billion and a bond issuance quota of $30 billion.
According to Asia Times, China’s aviation sector hopes to see an improvement in its operations this summer, rebounding since mid-May.
However, in the meeting held on July 8, Song Zhiyong pointed out that due to the repeated impact of the Covid-19 epidemic, the industry performance fell into a trough in the first half of the year, with only nearly 3000 flights per day. That accounts for only 17.8% of the same period in 2019, making it the lowest level so far.
Since the epidemic, the cumulative loss has been about $45 billion. The first half of 2022 recorded over $15 billion, exceeding the losses in 2 previous years.
The industry’s Liability to Assets Ratio (L/A) has reached 82.2%, up nearly 12% compared with that before the epidemic. Twelve airlines show the L/A ratio exceeding 100%, pushing them into serious insolvency.
According to Shong Zhiyong, civil aviation has faced unprecedented difficulties in the first half of this year.
He listed some difficulties, such as a sharp rise in international oil prices and fuel costs, the depreciation of the RMB against the U.S. dollar, and the consumption of anti-epidemic materials.
Besides, confidence in China’s aviation has also been shaken since the plane crash of Chinese Eastern Airlines in March—China’s deadliest air disaster in three decades, killing all 132 people on board.
China’s Tibet Airlines plane crash also made people worry about Chinese airlines’ safety. In May, the plane burst into flames after veering off the runway. The accident caused 36 passengers to be hospitalized with minor injuries, and the fire damaged the aircraft.
The incoming summer is a good opportunity for domestic airlines to reduce losses because summer is one of the two most profitable periods for domestic airlines—the other is spring. Nevertheless, Song said the industry would face a challenging task in the second half. The repeated epidemics in many parts of the nation have reduced the industry’s confidence in recovery during the summer.
Song says that it is extremely difficult to achieve this year’s business target according to the current situation.