Domestic advantages boost China Southern’s post-COVID prospects

China Southern's domestic capacity has soared beyond pre-pandemic levels after recent setbacks, but the grim outlook for international traffic is causing the carrier to re-evaluate its fleet plans.

While the COVID-19 crisis will add complications to its dual-hub strategy, the airline still has better medium term prospects than most others in the region.

As the largest airline in China, China Southern is affected by the same trends as the rest of the country's airlines. Following an initial plunge in early 2020, capacity rebuilt steadily and had fully recovered by the end of 2020. A new wave of infections early in 2021 caused a sharp drop, which affected the peak spring holiday season, but domestic capacity has resumed its upward climb and is now reaching new heights.

The sheer scale of the Chinese domestic market gives China Southern and the country's other airlines an advantage that many others in the Asia-Pacific region do not have.

The fact that COVID-19 cases have largely been brought under control in China also helps. But the dramatic rebound in capacity has created oversupply that is hurting revenue and yields. And like airlines in other countries, Chinese airlines will need international restrictions to be eased before they can move towards full recovery.