Why Chinese Airlines are so Unprofitable

About this video

• Video Title: Why Chinese Airlines are so Unprofitable
• Channel: Behind Asia
• Speakers: None explicitly named, narration throughout.
• Duration: 00:26:16

Overview

This video explains why major Chinese airlines consistently struggle to turn a profit despite the country's large aviation market. It details the core issue as a "pincer" of high costs (CASK) and low unit revenues (RASK), leading to a negative profit margin per seat kilometer. The analysis breaks down the specific factors contributing to these high costs and low revenues, and contrasts the performance of state-owned carriers with a profitable low-cost carrier.

Key takeaways

• The CASK/RASK Discrepancy: Chinese airlines, particularly large state-owned ones, often spend more to fly each seat (CASK) than they earn from it (RASK), resulting in consistent losses.
• High Operating Costs: Several factors inflate costs, including volatile fuel prices (exacerbated by less aggressive hedging and currency fluctuations), substantial fleet and finance costs from aggressive expansion, government fees, and inefficiencies caused by limited airspace and frequent delays that pad schedules.
• Depressed Revenues: Ticket prices, both domestic and international, are often below pre-pandemic levels due to oversupply, price sensitivity, and intense competition. The extensive high-speed rail network also siphons off passengers and pricing power on many key routes.
• Limited Ancillary Revenue Streams: Unlike Western airlines that heavily rely on loyalty programs and ancillary services (like baggage fees, seat selection) for revenue, Chinese state-owned airlines have been slower to adopt these models, limiting their overall earning potential.
• Contrast with Low-Cost Carriers: A profitable private carrier like Spring Airlines demonstrates that a different business model, focusing on extreme cost control, a single fleet type, and a robust ancillary revenue strategy, can achieve profitability even within the challenging Chinese market.