China’s Airlines: Promising Turnaround Clarity

Backed by pent-up domestic and inbound travel demand following the country’s full reopening in early 2023, China’s “Big Three” airlines saw a marked business improvement in H1 2023. As outbound traffic remains sluggish due to high outbound airfares and Chinese citizens' difficulties securing visas, we expect domestic volume to support most of the recovery in 2023. We think the upcoming travel season in China in Q4 2023 and sustainable capacity restoration will support a business turnaround in 2023 for Air China, China Eastern Airlines, and China Southern Airlines, and we expect earnings to strengthen in 2024 when international volume revives.