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2024.08.17

Word count: 1382, reading time: about 2 minutes

Introduction: In China, there are still only a few domestic airlines that have turned a profit.

Author |First Financial Daily Chen Shanshan

After the epidemic, some airlines still could not escape the fate of bankruptcy and suspension of operations.

On August 15, local time, Canada Jetlines announced that it would suspend operations with immediate effect because the company was in financial crisis and planned to file for bankruptcy protection. The company's shares were suspended from trading on the exchange late Wednesday afternoon.

Canada Jetlines is headquartered in Mississauga, Ontario, Canada. The company will launch its first flight in September 2022. It has four Airbus A320 aircraft and mainly operates flights to and from Canada and to the United States, the Caribbean and Mexico. In January 2023, Canada Jetlines suspended domestic flights and will focus on sunny destinations and leased aircraft.

Many Canadian airlines shut down

Canada Jetlines spokesperson Erica Dymond said in a statement that the company is exploring potential financing options, including strategic transactions and equity and debt financing. Despite these efforts, the company is currently unable to obtain the funds it needs to continue operations.

It is worth noting that just a few days ago, four members of Canada Jetlines' board of directors resigned collectively, including the chairman and CEO.

According to the reporter, Canada Jetlines currently has no direct flights to China. Canada Jetlines said that passengers who have already made reservations should contact their credit card companies to obtain a refund, and the company is currently making every effort to assist passengers.

Canada Jetlines is not the first airline to collapse after the pandemic. In Canada, Lynx Air and Swoop Airlines were shut down last year, and they were also positioned as low-cost airlines. Australia's Regional Express Airlines (Rex) also announced that it had entered bankruptcy proceedings recently, and all domestic Boeing 737 flights under the company were suspended. Rex was also positioned as a low-cost airline.

In the global airline profit forecast report released by IATA in June this year, North American airlines had the highest industry profits. However, IATA also pointed out that compared with the US market, Canada's passenger growth rate was slower and wage pressure was greater.

Recently, Air Canada pilots said they might strike in the coming weeks. Both the union representing the pilots (ALPA) and the airline said both sides were working hard to negotiate, and pilots wanted fair pay, decent retirement benefits and improved quality of life.

How is the China-Canada route going?

According to the reporter, not only is Canada's domestic aviation market sluggish, but the recovery of China-Canada international routes is also very slow.

According to the latest statistics from Flight Steward, in the past month, the recovery rate of China-Canada routes compared to before the epidemic is only 9%, which is lower than the recovery rate of China-US routes.

The slow recovery of some international routes is also an important factor affecting the performance of airlines. Willie Walsh, Director General of IATA, said that the unit revenue for each passenger transported in 2024 will be only US$6.14, "The profit is so slim that it is not even enough for a cup of coffee in many parts of the world. In order to improve profitability, it is crucial to solve supply chain problems so that capacity can be effectively deployed to meet demand."

In China, there are still only a few domestic airlines that have turned losses around. According to data released by the Air Transport Association of China, airlines as a whole suffered a cumulative loss of 4.71 billion yuan in the first half of the year, of which 7.2 billion yuan was lost in the second quarter. The unsatisfactory performance since the second quarter was mainly affected by the decline in passenger revenue, the significant year-on-year increase in oil prices and the depreciation of the RMB exchange rate.

Not long ago, a number of listed airlines also released their 2024 half-year performance forecasts. The four major airlines, Air China, China Eastern Airlines, China Southern Airlines and HNA Airlines, are all expected to continue to make losses in the first half of the year. This is not unrelated to the fact that international routes have not yet fully recovered and the overcapacity in the civil aviation industry.

The First Financial reporter consulted many industry insiders and estimated that it will still be difficult for China's civil aviation to achieve its overall goal of turning losses into profits this year.

However, compared with foreign airlines that have gone bankrupt and stopped operating at any time, domestic airlines have not yet closed down, although they have also suffered losses for four consecutive years. Industry insiders analyzed that this is related to the high value of domestic airline licenses. Since the Civil Aviation Administration of China has temporarily not approved the establishment of new trunk passenger airlines, the value of the licenses of established airlines has become more and more valuable. During the epidemic, some airlines also had difficulties in operation, but they were eventually taken over by local governments or other capital, such as Qingdao Airlines, Ruili Airlines, Longjiang Airlines, etc.

WeChat Editor| 73