The recent changes in the visa policies for foreign visitors to China have catalyzed a significant uptick in air travel demand, particularly for international and regional routesThe alterations, designed to bolster tourism and encourage foreign investment, have resulted in a noticeable recovery in passenger traffic for domestic airport-listed companiesAs they navigate their way back from the pandemic-induced slump, several of these companies have reported record highs in operating cash flow for the first three quarters of 2024. The year is marked by a robust recovery, with many publicly listed companies predicting a return to their pre-pandemic performance levels.

The revival of profitability in domestic airport-listed companies has become evident, especially in the upcoming forecasts set for January 2025. Two major airports from the Greater Bay Area have recently shared their performance predictions; for example, Baiyun Airport expects a non-GAAP net profit ranging from 808 million to 993 million yuan for 2024, which marks an impressive increase of over 111% from the previous yearSimilarly, Shenzhen Airport anticipates a projected net profit surge of between 296 million to 356 million yuan, a staggering rise of 289% to 328% year-on-year, effectively ending a three-year streak of losses.

Structural improvements in cost management have played a crucial role in this recoveryWith the opening of the Shenzhen-Zhong Channel, both Shenzhen and Baiyun airports have benefited significantly, enhancing operational efficiency while ensuring that the rise in expenses remains well below the increase in revenueRising passenger volumes have directly contributed to an uptick in net cash flow from operations, thus signaling an improvement in their overall financial health.

Despite the slow recovery trend within the duty-free sales segment, as it grapples with evolving market conditions and fierce competition, the fourth quarter of 2024 appears promising for Shanghai Airport

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Their passenger throughput has shown resilient growth, with figures indicating that international and regional passenger numbers are nearing pre-pandemic levels, reaching approximately 96% of December 2019 figuresThis aligns with a nationwide recovery trajectory where domestic civil aviation transported over 700 million passengers in 2024, reflecting an 18.1% year-on-year growth.

A highlight within this recovery narrative is Shenzhen Airport's historic milestone of surpassing 60 million passengers in throughput, complemented by cargo volume nearing 188,000 tonsThe airport records a 16.6% increase in passenger traffic and a 17.6% surge in cargo volume compared to the previous yearTheir ambitious forecast for the fiscal year projects a significant profit rebound, showcasing a transformation from loss to profitability that further establishes their pivotal role in the region's transportation network.

In response to the dynamic development of the Greater Bay Area, Shenzhen Airport has launched its first "Dual City" terminal connecting Hong Kong and several mainland cities including Huizhou and Dongguan, effectively increasing its access points to 25 city terminalsFuture expansion plans include the integration of three terminal areas, three runways, and a satellite hall to facilitate growing international and domestic demand.

The performance indicators for Shanghai Airport also reflect positive trends; with substantial improvements across the fourth quarter of 2024. Passenger throughput surged by 23%, 21%, and 20% in October, November, and December, respectively when compared to previous yearsParticularly impressive was the international traffic, which while still in the process of recovery, reached about 89% of the 2019 levels by the end of 2024.

Moreover, policy changes by the National Immigration Administration in December 2024 encourage foreign tourism and have seen foreign arrivals jump significantly, with figures surpassing 29 million for the year—an increase of 86.2% year-on-year

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Market observers, including BOC International Securities, view this initiative as a crucial step in promoting open access and facilitating growth in aviation demands.

The impressive recovery in cash flow has provided a robust basis for investment and continued expansionBy the end of the third quarter of 2024, net cash flow from Shenzhen Airport hit a record high of 1.605 billion yuan—effectively doubling its performance compared to the equivalent period in 2019. As operational metrics improve, these funds are likely to be allocated strategically towards expanding the primary aviation business and innovative initiatives.

Strategy improvements across airport operations have focused on scaling international business, enhancing service quality, resource configuration, and engaging with airlines for strategic partnershipsIncreased collaboration with international brands will likely heighten the competitiveness of airport businesses, thereby driving revenues further.

In the first three quarters of 2024, there has been a notable recovery in the aviation industry across both Pudong and Hongqiao Airports in Shanghai, particularly with passenger volumes outpacing cargo throughputThe reported numbers totaled 93.43 million in passenger traffic for these two facilities alone, with international passengers contributing to about 22.3% of that figureNotably, international flights and passenger volumes are still on a slow path to structural recovery, thereby impacting the velocity of revenue growth from air transport.

Meanwhile, Shanghai Airport reported a gross profit margin of 22.56% in the third quarter, an increase of 6.05 percentage points from the previous year, though still trailing significantly behind pre-pandemic levelsThe adjustments in retail strategies, including the shift to multi-channel sales platforms for duty-free merchandise, have resulted in a competitive landscape that challenges traditional airport retail dynamics.

Looking ahead, Shanghai Airport has displayed a marked improvement in cash flows during 2024, with a net cash flow from operational activities climbing to an all-time high of 3.804 billion yuan for the first three quarters

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