China Southern compensates losses with domestic profit

Editorial

China’s largest airline, China Southern Airlines, reported less severe losses in the second quarter of 2020 on Friday. Domestic travel is picking up again as the coronavirus outbreak seems largely under control in China.

Air China is doing better mainly due to an increase in domestic air travel. No new corona deaths have been reported since May, allowing for domestic travel restrictions to be lifted and therefore increasing the number of domestic air passengers. However, the leak is far from over for the Chinese aviation industry.

China Southern Airlines is the country’s largest airline in terms of passenger numbers. The airline recorded a loss of 2.9 billion yuan (355 million euros) in April-June, compared to 5.3 billion yuan (648 million euros) in the first quarter from January to March.

To get people to fly again, China Southern Airlines and many other Chinese carriers are massively dropping their prices, but this does not benefit profitability. However, the philosophy behind the price drop is that by offering flights at low fares, people will fly again and confidence in air travel will return.

Although the Chinese price stunts might seem remarkabe, given the financial situation of most airlines, there is an easy explination. All major Chinese carriers are fully state-owned, allowing the airlines to operate at a loss without having to fear bankrupcy.

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