Chinese airlines looking for relief in second half
By Yang Jian |
July 19, 2012, Thursday
|
Print Edition
Print Edition
CHINA'S airlines, facing a hefty drop in profit in the first half of this year, may find the going easier in the second half as fuel prices drop and domestic demand picks up amid ongoing summer vacations, analysts said yesterday.
China's three largest airlines have all forecast 50 percent dip in their first-half profits because of slack market demand and higher fuel costs.
"The negative operating results are due to a slowdown in domestic demand, the continued depression in the international market and the year-on-year growth in jet fuel price," Air China, the country's flagship air carrier, said in a statement filed with the Hong Kong Stock Exchange.
In addition, compared with the significant appreciation of the yuan against the US dollar in 2011, the yuan exchange rate has remained stable in 2012, so the airline has made lower foreign exchange gains compared to that in 2011, the airline said.
China Eastern Airlines, the country's second-largest carrier by passenger number, and China Southern Airlines, the country's largest carrier by fleet size, also cited similar reasons.
Severe situation
"China's civil aviation industry is facing a more severe situation than that experienced during the 2008 financial crisis," said Wang Changshun, Air China chairman.
He said the country's airlines had been impacted by the debt crisis in Europe, the slowing economic growth in the United States as well as the sluggish Asian economy.
However, industry players yesterday said fuel prices had been decreasing for some months now while domestic demand was also rising amid students' vacations in July and August.
Moreover, the coming Olympic Games in London will also help boost airlines' business in the short term.
"Domestic jet fuel prices have been declining since May and that could be big relief to carriers because fuel price accounts for over 40 percent of airlines' total costs," said Li Lei, an aviation analyst at China Securities Co.
Analysts with UBS Securities Co estimated passenger numbers in the domestic market would increase by 8 percent in July with Chinese school and university students beginning their summer vacations. So, net profits will start rebounding in the third quarter.
Liu Shaoyong, chairman of China Eastern, also said he believed the airline's annual profit in 2012 would still increase on year, but the growth rate would slow down.
China's three largest airlines have all forecast 50 percent dip in their first-half profits because of slack market demand and higher fuel costs.
"The negative operating results are due to a slowdown in domestic demand, the continued depression in the international market and the year-on-year growth in jet fuel price," Air China, the country's flagship air carrier, said in a statement filed with the Hong Kong Stock Exchange.
In addition, compared with the significant appreciation of the yuan against the US dollar in 2011, the yuan exchange rate has remained stable in 2012, so the airline has made lower foreign exchange gains compared to that in 2011, the airline said.
China Eastern Airlines, the country's second-largest carrier by passenger number, and China Southern Airlines, the country's largest carrier by fleet size, also cited similar reasons.
Severe situation
"China's civil aviation industry is facing a more severe situation than that experienced during the 2008 financial crisis," said Wang Changshun, Air China chairman.
He said the country's airlines had been impacted by the debt crisis in Europe, the slowing economic growth in the United States as well as the sluggish Asian economy.
However, industry players yesterday said fuel prices had been decreasing for some months now while domestic demand was also rising amid students' vacations in July and August.
Moreover, the coming Olympic Games in London will also help boost airlines' business in the short term.
"Domestic jet fuel prices have been declining since May and that could be big relief to carriers because fuel price accounts for over 40 percent of airlines' total costs," said Li Lei, an aviation analyst at China Securities Co.
Analysts with UBS Securities Co estimated passenger numbers in the domestic market would increase by 8 percent in July with Chinese school and university students beginning their summer vacations. So, net profits will start rebounding in the third quarter.
Liu Shaoyong, chairman of China Eastern, also said he believed the airline's annual profit in 2012 would still increase on year, but the growth rate would slow down.
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