China’s domestic airlines lost over six billion dollars in 2021, but logistics are booming
China’s three domestic airlines, China Southern Airlines 中国南方航空, Air China 中国国际航空, and China Eastern Airlines 中国东方航空, all announced their annual earnings this week, and the results were terrible across the board.
- China Eastern Airlines, whose flight MU-5735 crashed in Guanxi last week, announced net losses of 13.54 billion yuan ($2.13 billion), an increase of 3.2% year-on-year.
- China Southern Airlines announced net losses of 12.63 billion yuan ($1.99 billion), an increase of 8.34% year-on-year.
- The damage at Air China was most severe: 17.06 billion yuan ($2.68 billion), a year-on-year increase of 15.71%.
The context: For the last two years, China’s civil aviation industry has faced severe pressures as COVID-19 nearly brought global air travel to a halt. Since 2019, the Chinese civil aviation industry has suffered cumulative losses of 211.1 billion yuan ($33.27 billion), including 170.6 billion yuan ($26.88 billion) losses by airlines and 54 billion yuan ($8.5 billion) losses for airport companies.
- In October 2021, the International Air Transport Association (IATA) announced net global industry losses of $51.8 billion for 2021, but projected losses of only $11.6 billion for 2022.
On the other hand, while moving people in planes has not been a good business during the pandemic, moving stuff around has never been more profitable:
- China’s logistics market is already outstripping 2019 growth levels. The Federation of Logistics and Purchasing this week reported total domestic logistics of 51.8 trillion yuan ($8.1 trillion) for the first two months of 2022, a year-on-year increase of 7.2%, marking strong growth in demand. Demand for freight services for consumer goods increased by 9.7% year-on-year.
- The industry is consolidating: In December 2021, China’s largest current logistics company, China Logistics Group 中国物流集团, was formed with registered capital of $4.7 billion, merging five state-owned companies.
- The intelligent freight services platform Super Camel 超级骆驼, announced this week it had obtained nearly $10 million in pre-A round financing. Established in September 2021, Super Camel focuses on dispatching a mixture of three-wheeled and unmanned vehicles using an AI intelligent dispatching system.
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The takeaway: The COVID pandemic has had a devastating effect on civil aviation in China as elsewhere in the world, but has accelerated the development of logistics. Following a slowdown in 2020, demand soared in 2021 and China’s leading logistics companies are increasingly investing in smart equipment including digitalization, artificial intelligence, and big data to more effectively manage transportation, warehousing, and packaging.