China's 3 major airlines record sharp decline in annual profits
Source: Agencies |
March 28, 2013, Thursday
|
Print Edition
Print Edition
CHINA'S three major state-owned airlines posted sharp drops in annual profit because of the weak global economy, higher jet fuel prices and smaller foreign currency gains.
China Southern, the country's biggest carrier by passenger numbers, said yesterday that profit plunged by half compared with the previous year. Air China and China Eastern reported earnings tumbled by about a third.
"Demand in the aviation industry in 2012 continued to be weak as a result of the slow recovery of the US economy, the on-going European debt crisis and the global recession," Beijing-based Air China said. "Escalating operating costs from high jet fuel price and the intensifying competition added to the challenges faced by the industry."
China Eastern said the average price of fuel rose 2 percent. The Shanghai-based carrier said profit fell 35 percent to 2.95 billion yuan (US$474 million).
Jet fuel costs rose the most for China Southern. The Guangzhou-based carrier said it spent 33 billion yuan on fuel last year, 14.5 percent more than in 2011.
Fuel is the biggest single expense for the airlines. Chinese airlines can do little to keep their fuel bill under control. One reason is that fuel for domestic flights is supplied by a state-owned monopoly, which marks up prices "higher than an otherwise open market would allow," Barclays analyst Patrick Xu wrote in a report.
Chinese carriers also don't typically use hedging contracts to lock in part of their fuel bill, like other airlines do, because they lost a lot of money in 2008 using such techniques, Xu added.
The three airlines also reported sharply lower foreign exchange gains as the yuan's appreciation against the dollar slowed from the year before. Chinese airlines are vulnerable to currency fluctuations because while they mostly earn in yuan, their expenses for fuel and new airplanes are in dollars.
Air China, which said profit fell 35 percent to 4.6 billion yuan last year, reported a net foreign exchange gain of 124 million yuan, compared with 3 billion yuan in 2011. The other two carriers also reported sharp declines in foreign currency income.
China Southern carried 86.5 million passengers last year, or 7.2 percent more than 2011, but earnings fell by half to 2.6 billion yuan.
China Southern, the country's biggest carrier by passenger numbers, said yesterday that profit plunged by half compared with the previous year. Air China and China Eastern reported earnings tumbled by about a third.
"Demand in the aviation industry in 2012 continued to be weak as a result of the slow recovery of the US economy, the on-going European debt crisis and the global recession," Beijing-based Air China said. "Escalating operating costs from high jet fuel price and the intensifying competition added to the challenges faced by the industry."
China Eastern said the average price of fuel rose 2 percent. The Shanghai-based carrier said profit fell 35 percent to 2.95 billion yuan (US$474 million).
Jet fuel costs rose the most for China Southern. The Guangzhou-based carrier said it spent 33 billion yuan on fuel last year, 14.5 percent more than in 2011.
Fuel is the biggest single expense for the airlines. Chinese airlines can do little to keep their fuel bill under control. One reason is that fuel for domestic flights is supplied by a state-owned monopoly, which marks up prices "higher than an otherwise open market would allow," Barclays analyst Patrick Xu wrote in a report.
Chinese carriers also don't typically use hedging contracts to lock in part of their fuel bill, like other airlines do, because they lost a lot of money in 2008 using such techniques, Xu added.
The three airlines also reported sharply lower foreign exchange gains as the yuan's appreciation against the dollar slowed from the year before. Chinese airlines are vulnerable to currency fluctuations because while they mostly earn in yuan, their expenses for fuel and new airplanes are in dollars.
Air China, which said profit fell 35 percent to 4.6 billion yuan last year, reported a net foreign exchange gain of 124 million yuan, compared with 3 billion yuan in 2011. The other two carriers also reported sharp declines in foreign currency income.
China Southern carried 86.5 million passengers last year, or 7.2 percent more than 2011, but earnings fell by half to 2.6 billion yuan.
- About Us
- |
- Terms of Use
- |
-
RSS - |
- Privacy Policy
- |
- Contact Us
- |
- Shanghai Call Center: 962288
- |
- Tip-off hotline: 52920043
- 沪ICP证：沪ICP备05050403号-1
- |
- 互联网新闻信息服务许可证：31120180004
- |
- 网络视听许可证：0909346
- |
- 广播电视节目制作许可证：沪字第354号
- |
- 增值电信业务经营许可证：沪B2-20120012
Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.
