China: Chinese carriers struggle with fuel costs

Chinese airline giants Air China andChina Eastern Airlines recently reportednet profits of CNY1.28 billion (US$186.94million) and CNY42 million (US$6.13million), respectively, for the first halfof 2008. Net profit of Air China and ChinaEastern Airlines in the first half dropped1.4 per cent and 28.5 per cent year-onyear,respectively. Both Air China andChina Eastern obtained exchange gainsof CNY1.9 billion […]


Chinese airline giants Air China andChina Eastern Airlines recently reportednet profits of CNY1.28 billion (US$186.94million) and CNY42 million (US$6.13million), respectively, for the first halfof 2008.

Net profit of Air China and ChinaEastern Airlines in the first half dropped1.4 per cent and 28.5 per cent year-onyear,respectively. Both Air China andChina Eastern obtained exchange gainsof CNY1.9 billion in the period, whichmeans the two airlines incurred operatinglosses in the first half.

Earlier, China Southern Airlines reporteda net profit of CNY838 million(US$122.7 million) for the first half year,a rise of 368 per cent year-on-year. Butthe airline’s net profit is still less thanits exchange gains in the period, whichtotaled CNY2.6 billion.

Due to jet fuel oil price hikes, theoperating costs of Air China and ChinaSouthern far outgrew their revenues inthe first half year.

Air China’s operating turnover in thefirst half saw a year-on-year rise of 13.3per cent, at CNY25.76 billion while itsoperating costs rose by 20.7 per cent toCNY23.13 billion over the same periodlast year.

China Eastern generated an operatingturnover of CNY20.8 billion in the firsthalf, up 6.3 per cent year-on-year. Its operatingcost totaled CNY19.7 billion, up 13.2per cent compared to the correspondingperiod in the previous year.

Kong Dong, board chairman of AirChina, noted that high oil price and a slowdown of global economic growth are sureto affect the aviation industry in the nextseveral months or longer.

China Southern’s group chairman LiuShao Yong was more blunt, saying he expectsthe industry "to undergo a long periodof hardship" owing to the combinedburdens of "insufficient market demand,fierce competition and high oil prices."