Downturn worrisome for Chinese carriers

Lower oil prices this month have lessened the pain for struggling Chinese airlines, but a slowing domestic economy and worsening outlook for consumers worried about Europe’s debt crisis threaten the health of these carriers, industry executives said recently.


Downturn worrisome for Chinese carriers


Lower oil prices this month have lessened the pain for struggling Chinese airlines, but a slowing domestic economy and worsening outlook for consumers worried about Europe’s debt crisis threaten the health of these carriers, industry executives said recently.

Airline chief executives attending the International Air Transport Association (IATA) meeting in Beijing last month said they have renewed concerns about the outlook for China’s biggest carriers, all of which were making healthy profits only two years ago.

“The drop-back of oil prices may help, but it may be offset by further weakness in terms of consumer confidence,” said Andrew Herdman, director general of the Association of Asia Pacific Airlines. “We learnt in the global financial crisis (that) when headlines look very bad, even if it’s a story in America or Europe, people become more cautious.”

Crude oil prices fell more than US$20 per barrel in May, but cautious consumer behaviour led to a steady drop in the annual growth rates of air passenger volumes in China, from 15.8 per cent in 2010 to 9.2 per cent in 2011 and 6.9 official data. All top three Chinese carriers – China Eastern Airlines, Air China and China Southern – reported a more than 70 per cent slump in their latest quarterly earnings.