Tax waiver to boost airlines
By Winny Wang |
May 6, 2010, Thursday
|
Print Edition
Print Edition
CHINESE airlines will be exempted from a business tax imposed on international routes as the government moves to help carriers expand their presence globally as international air travel recovers.
As the exemption has been made retroactively from January 1, 2010, domestic carriers do not need to pay the 3 percent tax on international routes, and the tax that has been paid will be refunded, the Ministry of Finance said on its Website yesterday.
The policy also applies to firms or individuals that offer international delivery services, such as shipping firms, the ministry said.
"Canceling the business tax can help create a fairer market as overseas airlines have been already exempted from the tax to boost their international business, which plunged amid the global financial crisis," an industry source said.
"Airlines can save more money if they fly more international routes under the new policy," the source said.
As global travel demand recovers, domestic carriers are boosting their footprint. China Eastern Airlines announced last month it would join the SkyTeam alliance, linking it to 856 destinations in 169 countries. The Shanghai-based carrier expects to increase international flight capacity this year to 40 percent from 30 percent.
China Southern Airlines also plans to boost its presence globally by expanding international flights from 17 percent to 30 percent of its network. "Airlines and shipping firms will benefit from the new policy.
Air China, which operates the most international flights among all Chinese carriers, is expected to save about 1 billion yuan (US$146 million) in pre-tax profit annually, based on its 31.3 billion yuan revenue from international routes last year," said Li Shurong, an analyst at Shenyin & Wanguo Securities Co.
"China Eastern and China Southern, both of which generated 8 billion yuan revenue from international routes last year, can each save more than 200 million yuan annually," Li said.
Chinese carriers flew 4.4 million passengers on international routes in the first quarter of this year, a jump of 27.8 percent from a year earlier, while passengers on domestic routes only increased 15.9 percent, according to the Civil Aviation Administration of China.
As the exemption has been made retroactively from January 1, 2010, domestic carriers do not need to pay the 3 percent tax on international routes, and the tax that has been paid will be refunded, the Ministry of Finance said on its Website yesterday.
The policy also applies to firms or individuals that offer international delivery services, such as shipping firms, the ministry said.
"Canceling the business tax can help create a fairer market as overseas airlines have been already exempted from the tax to boost their international business, which plunged amid the global financial crisis," an industry source said.
"Airlines can save more money if they fly more international routes under the new policy," the source said.
As global travel demand recovers, domestic carriers are boosting their footprint. China Eastern Airlines announced last month it would join the SkyTeam alliance, linking it to 856 destinations in 169 countries. The Shanghai-based carrier expects to increase international flight capacity this year to 40 percent from 30 percent.
China Southern Airlines also plans to boost its presence globally by expanding international flights from 17 percent to 30 percent of its network. "Airlines and shipping firms will benefit from the new policy.
Air China, which operates the most international flights among all Chinese carriers, is expected to save about 1 billion yuan (US$146 million) in pre-tax profit annually, based on its 31.3 billion yuan revenue from international routes last year," said Li Shurong, an analyst at Shenyin & Wanguo Securities Co.
"China Eastern and China Southern, both of which generated 8 billion yuan revenue from international routes last year, can each save more than 200 million yuan annually," Li said.
Chinese carriers flew 4.4 million passengers on international routes in the first quarter of this year, a jump of 27.8 percent from a year earlier, while passengers on domestic routes only increased 15.9 percent, according to the Civil Aviation Administration of China.
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