Xiaomo: The second-quarter losses for Chinese aviation stocks were the worst in three years, and the outlook for the industry is cautious

The Zhitong Finance App learned that J.P. Morgan Chase released a research report saying that the three major Chinese airlines have released performance forecasts for the first half of this year, indicating that net losses for the second quarter of this year will be the worst in the past three years. J.P. Morgan Chase's views on related stocks remained unchanged: it maintained its “reduced” ratings for China Eastern Airlines (00670) and China Southern Airlines (01055); it also maintained a “neutral” rating for Air China (00753) and Spring Airlines (601021.SH).

According to the report, after recording net profit in the first quarter of this year, dragged down by high oil prices and weak basic ticket prices, the average net loss of the three major airlines in the second quarter of this year is expected to reach 4.3 billion yuan (same below), the highest single-quarter loss since 2023. Demand for summer travel also fell short of expectations. Passenger traffic and flight volume both declined year over year, and basic net fares continued to be under pressure, while the railway substitution effect continued to intensify. Despite the reduction in fuel surcharges, weak pricing has not stimulated demand and strengthened the prudent outlook for the industry.

In terms of specific forecasts, Air China expects a net loss of 4.1 billion yuan for the second quarter of this year, compared with a profit of 200 million yuan for the same period last year; China Eastern Airlines and China Southern Airlines are expected to lose 3.7 billion yuan and 5.2 billion yuan respectively for the second quarter of this year, with losses increasing by 756% and 562%, respectively. Cumulatively, it is estimated that for the first half of this year, the average net loss of the three major airlines was 2.7 billion yuan, while Air China, China Eastern Airlines and China Southern Airlines lost 2.4 billion yuan, 2.1 billion yuan and 3.7 billion yuan respectively, a year-on-year deterioration of 30%, 19%, and 143%, respectively.