Air China and China Eastern’s Record 2022 Losses Were Expected, but Guidance Disappoints

Air China and China Eastern Airlines’ record losses in the fourth quarter of 2022 were well expected, but we are slightly disappointed with management’s guidance. While the outlook for domestic travel is ahead of our expectations, international travel is sluggish. We raise our 2023 domestic capacity forecasts to 107%-109% of 2019 levels for the two airlines, but cut our international capacity forecasts to 43%-45% of 2019 levels. We estimate both will remain lossmaking in 2023 with CNY 3.2 billion net loss for Air China and CNY 1.9 billion net loss for China Eastern. This contrasts with our CNY 7.8 billion profits estimate for China Southern, primarily as a result of China Southern’s larger exposure to the domestic market.