The Spring Festival, a time of festive celebrations and familial reunions in China, has historically marked a peak in transportation demandsRecent statistics reveal a remarkable surge in air travel during this period, with daily passenger traffic reaching an astounding average of 2.28 million—a 1.4% increase compared to last year and an impressive 26.8% higher than in 2019, prior to the pandemicJust before the Spring Festival rush, which unfolded over the first 22 days, an average of 2.27 million travelers journeyed by air, indicating a 6.8% increase year-on-year and a 26.6% growth compared to the same period in 2019. The growing demand for travel is pivotal, providing airlines with a substantial boost in performance.

As demand continues to rebound, the international aviation sector is set for a significant revival in the coming yearsA recent report by Haitong Securities has highlighted that as global foreign relations become more cordial and visa regulations relax, the appetite for international air travel is expected to gain further momentumAlongside a marked recovery in travel confidence, the deceleration in the rate of capacity expansion among Chinese airlines bolsters the optimism regarding long-term investments within this sector.

Amid these positive developments, major state-owned airlines such as Air China, China Eastern Airlines, and China Southern Airlines recently announced their projected financial performance for 2024, revealing anticipated lossesAlthough they are not expected to achieve profitability this year, the extent of their losses has shown a narrowing trendNotably, China Eastern Airlines is predicted to experience the largest reduction in losses, forecasting a decline of between 3.868 to 4.868 billion yuan.

To break it down further, Air China anticipates a net loss ranging from 160 to 240 million yuan, a significant decrease from its previous loss of 1.046 billion yuan last year—an improvement of approximately 77.1% to 84.7%. Similarly, China Eastern Airlines is likely to face a net loss between 3.3 to 4.3 billion yuan, which marks a substantial reduction from last year's loss of 8.168 billion yuan, calculating a decline of 47.4% to 59.6%. China Southern Airlines also projects a net loss of 1.25 to 1.87 billion yuan, down from 4.209 billion yuan in the prior year, thereby achieving an approximate reduction of 55.6% to 70.3%.

Overall, the three major airlines are expected to collectively incur losses between 4.71 billion and 6.41 billion yuan in 2024, a significant reduction from combined losses of 13.423 billion yuan in 2023—indicating a decrease of approximately 50% to 60%. The various challenges faced, such as intensified market competition and fluctuations in foreign exchange rates, have been cited by these airlines as key factors contributing to their losses.

The financial performance of these pivotal players in the aviation sector serves as a reflection of the rapid recovery taking place across the industry

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According to the national civil aviation conference held in 2025, the entire aviation industry is projected to diminish overall losses by 20.6 billion yuan, with expectations of transitioning into profitabilityFor the entirety of 2024, passenger throughput is estimated at 730 million, surpassing the initial projections made at the beginning of the yearThis reflects a year-on-year increase of 17.9% and offers a more substantial recovery compared to pre-pandemic levelsInternational flights are also expected to increase, reaching 6,400 weekly, amounting to 84% of pre-pandemic levels, along with a 29.3% increase in international freight volumes.

Nevertheless, a notable phenomenon has emerged in 2024—where the aviation market is witnessing an increase in volume but a decrease in pricingAverage economy-class ticket prices have fallen by more than 10% compared to 2023. Air China's semi-annual report revealed that the revenue per passenger kilometer dropped by 12.08%, leading to a decline in yieldSimilarly, China Southern Airlines saw a drop of 9.36% in its revenue per revenue ton kilometer over the same period.

As the cost-side pressures mount, the volatility of fuel prices continues to play a crucial role in shaping the airline industry's profit dynamicsFor example, in the first half of 2024, Air China's aviation fuel costs totaled 27.132 billion yuan, accounting for 35.02% of operating costsMeanwhile, China Eastern and China Southern reported fuel costs of 23.292 billion yuan and 27.885 billion yuan, representing 37.29% and 35.5% of their respective operating costs.

The year 2024 has shown international oil prices fluctuating widely, driven by OPEC+'s unforeseen production cuts vis-à-vis a global trend of monetary easingBrent crude's average price was approximately $79.86 per barrel, a 2.31 decrease from 2023—with a trading range stretching between $69 to $91, showcasing a variance exceeding $20 per barrelMeanwhile, WTI and Dubai crude prices have followed a similar trend, being marginally lower than in 2023. Overall, aviation fuel prices are projected to decline by 7% year-on-year, particularly in Q4, where significant price drops helped alleviate some cost pressures faced by airlines.

Looking ahead into 2025, the situation appears to be stabilizing

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OPEC's voluntary cuts are likely to be extended through the end of March, leading to a continued tightening of suppliesAs concerns about surplus supplies rise, industry experts predict sustained pressure on oil prices moving forwardAlthough market forecasts for international oil prices in 2025 differ, a general downward trajectory is anticipated, with a prevailing somber outlookA decrease in fuel costs could serve as a windfall for the aviation sector, facilitating an uptick in profitability.

In terms of supply and demand, the trajectory of recovery seems promising, indicating an auspicious horizon for international aviation growthWith industry capacity constrained and demand consistently rising, airlines are poised for optimistic earnings recoveryA marked increase in passenger loads is already evident, with the comprehensive industry load factor exceeding levels from 2019 in the third quarter of 2024. By December, the load factor reached 82%, reflecting a 1.2% increase compared to the same month in 2019, maintaining high occupancy even during the off-peak seasons.

Looking towards 2025, passenger volumes are expected to further grow, with projections indicating annual transport numbers of 780 millionNotably, resilience in business and public travel demand has emerged, with monthly travelers for business purposes remaining stable at around 30 million—a 15% increase compared to pre-pandemic figures in 2019.

In terms of capacity, airlines are experiencing tight supply expectations, lifting prospects for fare increasesBy the end of 2024, the fleet numbers indicate that Air China operates 930 aircraft, China Southern has 899, and China Eastern possesses 804, among others—showing modest growth rates below original projectionsBetween 2023 and 2026, net growth rates for aircraft are expected to hover around 4% annually, revealing significant constraints in capacity supply.

A deeper dive into international routes suggests that there remains considerable room for recovery

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