Chinese airlines’ profits hurt by weaker travel demand
Air China Ltd. (601111.SH), China's biggest carrier by market value, reported an 85.7 percent drop in net income to 239 million yuan during the first quarter.
Another state-owned carrier, China Southern Airlines Co. Ltd. (600029.SH), the nation's biggest by fleet size, saw its Q1 net income tumble by 74 percent to 319 million yuan.
Both carriers said their seat occupancy rates were sharply down from the same period last year, as fleet size expansion came during a period of weakening travel demand.
Q1 profits were down also in part due to smaller foreign exchange gains after the yuan halted advances against the U.S. dollar that had pared the value of debts from buying aircrafts.
Air China said its currency gains in Q1 were 586 million yuan less than a year earlier.
China Eastern Airlines Co. Ltd. (600115.SH), another one of China's three state-owned carriers, said it expected its profit to fall by more than 50 percent for the first 3 months of the year.
Despite its profit warning, China Eastern continues to expand its fleet size and is said to be buying 20 Boeing 777 aircraft worth a combined $ 6 billion.
Source: 21 Century Business Herald
China - Beijing, Shanghai, Guilin, Yangshou, Hong Kong. August 2011 trip.
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