According to investors, Chinese airlines are recovering faster than other airlines as domestic travel within China has come back at a faster pace than other countries who were also devastated by the pandemic’s effect.
The aviation sector’s significant airlines have acquired substantial losses after following containment and measures to decrease the coronavirus spread. The pandemic entailed most airlines closing their borders and put travel restrictions on people’s movement. As a consequence, many airlines needed to shut down.
Based on records, China had the most number of coronavirus cases at the start of the year. The presence of coronavirus led them to perform lockdown in many cities. Though China is the first country to be affected by the coronavirus, it has shown stability after it resumes domestic travel and lessens restrictions.
“For now, Chinese holidaymakers are opting for shorter distance leisure trips by car or train, and forward bookings are being made with a much shorter booking window (one week)… Nevertheless, while the upturn in Chinese air travel is lagging road travel, Chinese airlines are still ahead in the recovery compared to their American and European counterparts, as they benefit from the recovery in domestic travel”Eastspring Investments said in a report
The asset manager saw that most airlines in China get their revenues through domestic travel. With the stability of local tourism, airlines “are likely to be more resilient than other regional airlines for the rest of the year,” the manager said.
HSBC maintained its “buy” rating on shares of Air China, China Eastern Airlines, and China Southern Airlines after seeing domestic travel stability in China.
The global airline shares have decreased this year with many significant losses due to the pandemic. Investors perceive the failures to decline in the coming months, with increased domestic travel. HSBC stated that though domestic travel may increase, it will not be beneficial to airports, which depends on international traffic for profits.
“We continue to expect domestic passenger traffic to recover sooner than international traffic, which is favorable for mainland Chinese airlines as they generate the most profit on domestic routes,” HSBC said last Monday.
“On the other hand, airports generate most of their profit from international traffic, given aeronautical charges (passenger service charges and landing and parking charges) are usually higher for international traffic than for domestic traffic, and international passengers mainly drive duty free revenue at airports,” it added.