By Kimberley Kao


China's demand for air travel surged in the first half of the year, with passenger numbers on international routes more than tripling on the back of relaxed visa policies and a weaker yuan but still falling short of prepandemic levels.

Nearly 350 million passengers took to the skies in the first half of 2024, up 23.5% on the year and 9% from 2019 levels, state media said Friday, citing data from the Civil Aviation Administration of China. That includes both local and foreign travelers.

The figures signal continued, but uneven, momentum in the country's post-Covid travel recovery.

Passengers on domestic flights numbered 320 million in the first six months of 2024, up 16% on the year and exceeding 2019 levels, according to data from China's Ministry of Transport. Passengers on international routes more than tripled to 29.7 million, reaching 82% of prepandemic levels in 2019, the ministry numbers showed.

Demand was helped by factors including the eased restrictions on visas and changing consumer spending, analysts said.

"Visa-free arrangement may be having some positive impact on inbound travel numbers," while the weakness in the yuan potentially makes foreign travel to China more attractive, said Jun Rong Yeap, market strategist at IG.

Lynn Song, Greater China chief economist at ING, said "travel numbers have been resilient" with consumers rebalancing spending away from big-ticket purchases and "toward categories more focused on enjoyment" at a time of weaker consumer confidence.

The first-half growth came after the CAAC said in April that passenger trips in the first quarter had expanded 38% on year.

Still, China's biggest carriers--Air China, China Eastern Airlines and China Southern Airlines--have all flagged higher-than-expected net losses for the first half of the year, despite the April-June period being a seasonally strong one.

For the first six months of 2019, all three reported net profits of more than 1 billion yuan ($137.9 million).

The so-called "Big Three" carriers, which have been focusing on ramping up international flights, are lagging behind Spring Airlines and Juneyao Air in terms of earnings, DBS Group Research analyst Paul Yong said in a research note. The two domestic-focused airlines have both recently issued positive earnings guidance, Yong said.

"This could be due to consumers downtrading to cheaper air travel options amid macroeconomic uncertainties," Yong wrote.

Citi research analysts said in a note that the negative guidance from the biggest operators reflects slower-than-expected recovery of international routes and the lagging recovery in outbound passenger capacity.

"The outlook of China's aviation sector is expected to be mixed," says Sonija Li, head of retail research at Maybank Investment Bank. "China airlines may still record [a] net loss for overall 2024."

China has reported weaker-than-expected economic growth for the second quarter and tepid consumer inflation data for June, pointing to persistently lackluster demand despite Beijing's efforts to juice up consumption.


Write to Kimberley Kao at kimberley.kao@wsj.com


(END) Dow Jones Newswires

07-15-24 0552ET