Chinese Airlines Earnings: Summer Travel Demand Drives Turnaround but Profit Below Expectation

The three Chinese airlines we cover—Air China, China Southern Airlines, and China Eastern Airlines—all turned profitable in the third quarter on the back of strong summer travel demand. However, the profitability level is lower than expected. We believe the rising jet fuel price and falling international passenger yield weighed on earnings. After adjusting our fuel cost and passenger yield assumptions, we reduce our 2023 net income estimates by CNY 2.4 billion-CNY 5.2 billion for the three airlines. We now forecast CNY 1.1 billion net income for Air China, CNY 2.6 billion net income for China Southern, but CNY 3.0 billion net losses for China Eastern.