Due to major travel disruptions, including a strict COVID-related lockdown in Shanghai, China’s three largest airlines reported a combined second-quarter loss of 28.4 billion yuan ($4.12 billion) on Tuesday, a larger loss than in the first quarter.

The country’s policy of localized lockdowns in response to case numbers that are small by global standards has forced carriers to frequently halt domestic travel, the main source of revenue in the face of border policies that have all but grounded international travel.

China Eastern Airlines, based in Shanghai, reported a net loss of 10.9 billion yuan in the third quarter, up from 7.8 billion yuan in the first quarter and the highest of the three, owing primarily to lockdowns in its home city.

In late March, China’s financial hub ordered its 25 million residents to stay at home, resulting in the cancellation of nearly all domestic flights from the city’s two airports throughout April.

In addition, the airline temporarily grounded its Boeing Co (BA.N) 737-800 planes following a fatal crash in late March, the cause of which is still unknown. 

The country’s flag carrier, Beijing-based Air China Ltd, reported a second-quarter loss of 10.5 billion yuan, a larger loss than the 8.9 billion yuan loss in the first quarter, when a strict travel policy was in place for the Winter Olympics.

China Southern Airlines lost 7.0 billion yuan in the second quarter, up from 4.5 billion yuan in the first.

The second-quarter figures were calculated by Reuters because airlines report first and half-year results but do not break out the second quarter.

The combined losses of the country’s three largest airlines totaled nearly 50 billion yuan in the first half, far exceeding the total half-year loss of 16.7 billion yuan in the same period last year.

Last week, the three state-owned airlines reaffirmed plans to purchase a total of 292 Airbus A320neo family narrowbody jets worth more than $37 billion at list prices.

More than three years after being grounded following two fatal crashes, the Boeing Co 737 MAX has yet to resume commercial service in China.

According to Jefferies analysts, domestic flights in China recovered modestly in June, but conditions worsened in late July as increasing case numbers in popular travel destinations such as Hainan Island, Xinjiang, and Tibet prompted a new round of lockdowns.

According to Jefferies, the international market remains extremely depressed, with flight numbers at less than 1% of 2019 levels.

The US government announced on Thursday that it will suspend 26 China-bound flights in response to China’s decision to suspend some flights by US carriers due to COVID-19 cases. 

Other challenges for Chinese airlines include a weaker yuan and rising oil prices, according to HSBC analyst Parash Jain in a recent note.

(Adapted from USNews.com)

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