China Throws USD1.6 Billion Lifeline to Four Covid-Hit Aviation Giants
Chen Shanshan
DATE:  Jul 12 2022
/ SOURCE:  Yicai
China Throws USD1.6 Billion Lifeline to Four Covid-Hit Aviation Giants China Throws USD1.6 Billion Lifeline to Four Covid-Hit Aviation Giants

(Yicai Global) July 12 -- China’s civil aviation regulator said it will inject a total of CNY11 billion (USD1.6 billion) into three state-owned airlines and an airport operator to help support the embattled sector, which has suffered badly due to the pandemic.

The Civil Aviation Administration of China will pour CNY3 billion (USD445.5 million) into each of China Southern Airlines, China Eastern Airlines, and Air China, it announced at a press conference today. The CAAC will also give CNY2 billion to Capital Airports Holding, which runs Beijing Capital International Airport.

Moreover, the regulator has secured CNY150 billion (USD22.3 billion) of emergency loans for aviation companies after earlier this year securing CNY65.6 billion from financial institutions for airlines and airports.

The sector has wracked up losses approaching CNY300 billion since the first Covid-19 outbreak, CAAC Director Song Zhiyong said during a conference call on July 9.

The aviation market has been recovering since April. This month, the number of daily flights has continued to stay above 10,000, rebounding to about 64.5 percent of that before the pandemic. But losses have widened. In the first half, the sector had CNY108.9 billion of red ink, exceeding the full-year losses for 2020 and 2021.

Airlines are becoming increasingly indebted. The asset-liability ratio of Chinese carriers has reached 82.2 percent, up from 70.3 percent, Song said. For 12 firms, it exceeds 100 percent.

The demand for air travel may be harder to rekindle, but the CAAC has been quick to help in reducing costs. In the first half, it helped civil aviation companies secure CNY12.5 billion of value-added tax rebates and suspended VAT prepayments for airlines this, which is expected to save them about CNY1.8 billion.

Part of the assistance is related to surging fuel prices. The CAAC has coordinated domestic jet fuel producers to reduce ex-factory prices in phases. That is seen saving airlines CNY3.3 billion this year.

Other fees could also be cut. The CAAC has promoted the introduction of measures such as a phased deferral of social security payments, as well as a reduction or an exemption of real estate and land use taxes for aviation companies.

Editors: Tang Shihua, Emmi Laine, Xiao Yi

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Keywords:   Bailout Plan,Equity Injection,Additional Loans,Tax Rebate,Fuel Price Discount,Civil Aviation,COVID-19,Pandemic Impact,Industry Analysis,CAAC