China's Pandemic Pain Wanes

The Tide of Covid-Era Losses at China's Big Three Airlines is Finally Ebbing

Pushing Back: Inside the Issue

Just a few more days to go. On Thursday, Delta will take the stage in the opening act of first quarter earnings season. Recall that in mid-March, Delta said it would likely earn an operating margin (pre-interest and tax) of between 4 and 6 percent. United by contrast warned of a negative margin (pre-tax only) of between 2 and 3 percent. American’s pre-tax guidance was broader, ranging from negative 2.5 percent to positive 4.5 percent.

Even more interesting than the first quarter results will be second-quarter commentary — is demand still running super-strong? Supply, we already know, is running tight, with New York’s biggest airlines now grudgingly forced to pare schedules because of severe FAA controller shortages. And speaking of airlines having to cut capacity despite wanting to grow, KLM now faces a plan to ban overnight flying at Amsterdam's Schiphol airport.

Chinese airlines have the opposite problem: Too much capacity. The latest traffic data for February showed carriers still flying with lots of empty seats both domestically and internationally. Demand is certainly starting to revive following the end of severe travel restrictions. But airlines have a Himalayan hill to climb before recouping all the money they lost during the past three years. In 2022, China’s Big Three airlines alone (Air China, China Eastern, and China Southern) spilled nearly $18 billion in red ink.

In other developments last week, Airbus clinched an airplane order from longtime Boeing customer Icelandair. Labor unrest plagued air travel in France. Air India gave an update on its restructuring attempt. And a weakening U.S. dollar spells relief for most airlines outside the U.S.

Airline Weekly Lounge Podcast

Atlanta retained its title as the world's busiest airport last year, shocker we know. But more interesting is the rise of the Denver and Istanbul airports — to third and seventh busiest, respectively — that were not even in the top 10 in 2019. Plus, the unfortunate shortage of air traffic controllers in the New York-area this summer. Listen to this week’s episode, and find a full archive of the Lounge here.