Air China Reports Narrowed Loss in H1 2025 Amid Revenue Uptick

Associates and FX turned the dial

Share of results of associates increased to RMB1,220.2 million, including RMB1,174.0 million from Cathay Pacific. That, plus the FX tailwind, bridged the gap from operating loss to a smaller net loss.

Network and metrics: international growth, better loads, mixed cargo pricing

Capacity, load factors and yields explained

Key operating highlights from January to June 2025:

• ASK +3.37%, with International +16.70%; Mainland China -1.26%.
• RPK (revenue passenger kilometres) +5.23%, with International +16.99%.
• Passenger load factor rose to 80.72% (+1.43 pp). Mainland China improved to 82.84% (+2.17 pp).
• Passenger yield per RPK decreased 4.88% to RMB0.5107. Mainland China was the drag (0.5134, -6.23%), while International was only slightly lower (0.4889, -0.77%).

In simple terms: demand is rebuilding, especially across borders, and planes are fuller. Pricing, however, is softer, particularly in China’s domestic market.

Cargo: volumes steady, pricing a touch softer

• AFTK (available freight tonne kilometres) +4.96%; RFTK (revenue freight tonne kilometres) +7.66%.
• Cargo and mail load factor improved to 37.48% (+0.94 pp).
• Yield per RFTK was essentially flat at RMB1.4853 (-0.17%), with International yields down 2.52% and Mainland China up 4.25%.

Balance sheet and cash: highly geared, but liquidity backstops in place

Net current liabilities, but significant undrawn lines

Air China ended the period with net current liabilities of RMB78,459.0 million and a current ratio of 0.38. Cash and cash equivalents increased to RMB25,331.1 million, supported by operating cash inflow of RMB14,828.0 million. The Group highlights RMB180,093.0 million of unutilised bank facilities and prepares the accounts on a going concern basis.

Debt profile and gearing

• Total liabilities were RMB309,309.1 million; gearing ratio was 89.00%.
• Interest-bearing current debt decreased, while non-current debt increased, effectively terming out some obligations.
• Debt is predominantly RMB-denominated (88.85%), with US dollars at 10.96%.
• No financial hedges in place as at period end. Sensitivities disclosed: a 5% move in fuel price would change fuel costs by roughly RMB1,216 million; a 1% RMB move against USD would shift net profit and equity by about RMB133 million.

Fleet and capex: growing and refreshing with Airbus, Boeing and COMAC

The Group introduced nine aircraft and retired five in H1, ending with 934 aircraft (average age 10.28 years). The fleet includes Airbus (430), Boeing (462) and COMAC (39, including C919 and C909), plus three business jets. Capex was RMB5,859.0 million, including RMB2,362.0 million for aircraft-related investments and RMB2,726.0 million for long-term investment projects.

Capital commitments for future aircraft and related equipment stand at RMB93,200.0 million. Management’s introduction plan indicates 47 aircraft in 2025 and phased retirements, though it cautions that actual timing will depend on operations.

Risks and the near-term setup

• Market competition: management notes domestic supply-demand imbalance with declining prices, and intense competition in certain international regions.
• Oil and FX: material sensitivities remain, and there are no hedges in place.
• Alternative competition: China’s expanding high-speed rail network continues to exert pressure on short-to-medium haul demand and pricing.

My take: improving quality of loss, but pricing and leverage matter

There is clear progress beneath the headline loss. Loads are better, fuel has been a tailwind, finance costs are lower, and Cathay Pacific’s contribution is meaningful. The shift toward international traffic is strategically sensible and is cushioning the domestic yield downdraft.

Two watch-outs. First, operating loss widened, largely because “other income” tailwinds from asset disposals faded and operating intensity raised costs. A sustained recovery likely needs pricing to stabilise, especially in Mainland China. Second, leverage is high and the net current liability position is material, even though liquidity backstops are large and cash generation improved.

Overall, this reads as a transitional half: volume is back, revenue mix is improving, and the loss is narrowing for healthier reasons (FX and associates aside). If international ramp-up continues and domestic pricing steadies, the path to breakeven looks more visible. Until then, expect sensitivity to fuel and fares – and keep an eye on that undrawn RMB180.1 billion, which is the safety net for a very busy balance sheet.