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China Eastern $1.9bn in the red after 'zero-COVID' squeezes flights

Surging infections and deadly crash create earnings risks this year

A China Eastern Airlines plane taxis at Baiyun Airport in Guangzhou Province.   © AP

GUANGZHOU -- China Eastern Airlines closed the books last year with a net loss of 12.2 billion yuan ($1.92 billion), the carrier going deeper into the red as the result of China's strict coronavirus rules limiting international flights.

The massive loss came as revenue climbed 14% to 67.1 billion yuan, according to Wednesday's earnings statement. Domestic flights benefited from the early success of China's "zero-COVID" policies. Passenger traffic for those routes rose 9% on the revival of vacations and business trips within the country.

But those zero-COVID policies caused the passenger count on international routes to plunge by 88%. China Eastern lost out on the higher unit prices generated by cross-border flights, producing red ink that exceeded 2020's loss of 11.8 billion yuan.

China limits the number of landings by international flights as well as seat occupancy rates, based on the COVID-19 situation overseas. For that reason, international flights had an average occupancy of 45%, well below the 68% average for domestic flights.

China Eastern's losses echo the results of its biggest peers. China Southern Airlines, the country's leading carrier, recorded a net loss of 12.1 billion yuan last year. Air China, the flag carrier and second-biggest airline, posted a 16.6 billion yuan loss.

The airline industry likely faces a bitter business environment this year as well, partly due to the COVID-19 surge in Chinese cities such as Shanghai.

The fallout from last week's crash of China Eastern Flight MU5735 is another concern. It may take months or years for investigators to determine the cause of the accident, which killed all 132 passengers and crew members.

If the public avoids the airline while the investigation is underway, China Eastern's earnings will take a hit, even if it turns out that the airline was not responsible for the crash. Flight MU5735 is the worst air accident on the mainland in roughly two decades. The public will pay close attention to the investigation and China Eastern's response to grieving families.

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