Chinese Airlines Heading for a Strong Recovery as China Reopens Border

The three Chinese airlines—Air China, China Southern Airlines, and China Eastern Airlines—are set for a strong recovery in 2023 as China reopens its border. The move to end international travel restrictions came two quarters ahead of our expectations. As such, we have raised our international capacity forecast to about 65% of 2019 levels in 2023 from about 35% in our original forecast. We think Cathay Pacific should also benefit from a faster resumption of flights with the mainland, and hence we increase our 2023 seat capacity forecasts to 60% of 2019 levels from 55%. We expect the three Chinese airlines to remain in the negative, with losses ranging from CNY 0.4 billion to CNY 3.7 billion in 2023, but we expect Cathay to turn around with HKD 6.4 billion net income.