Profits soar at China’s big 3 airlines

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Singapore/ Bloomberg

China’s three biggest airlines reported soaring net profits in 2015 despite the country’s worst economic growth in a quarter of a century, as more Chinese travelled abroad.
Cheaper jet fuel helped the bottom line, but losses from foreign exchange hurt as China’s yuan currency slid against the dollar, they said.
“With the slowdown in world economic growth, and the ruggedness and hardship on the road of global recovery, China faced constant downward economic pressure,” China Southern Airlines said in a recent statement.
But its net profit more than doubled last year to 3.74 billion yuan ($575 million), it said. The figure fell just short of analysts’ expectations of 3.9 billion yuan, according to an average compiled by Blomberg News.
“The group seized the opportunity of decreasing fuel prices and increasing outbound tourism, which significantly improved the profit level,” said China Southern, which is Asia’s biggest airline by fleet size with 667 planes.
Flag carrier Air China said separately that its net profit surged 83 percent to 7.06 billion yuan.
“Although low fuel prices have helped to ease the pressure on operating costs, intensified industrial competition and substantial exchange rate fluctuations have posed severe challenges,” it said in a statement.
Air China Limited is the leading carrier and one of the major airlines of the People’s Republic of China, with its headquarters in Shunyi District, Beijing. Air China’s flight operations are based in Beijing Capital International Airport. In 2013, the airline carried 51 million domestic and international passengers with an average load factor of 81 percent.
Last year, the Chinese government launched a shock devaluation of the yuan, guiding the normally stable unit nearly five percent lower, and slowing growth has maintained downward pressure on the currency.
Air China estimated its net exchange loss at 5.16 billion yuan last year due to the depreciation of the yuan, according to its statement. Another carrier, China Eastern Airlines, reported a rise of just over 33 percent rise in net profit last year to 4.54 billion yuan, its statement said.
“In 2015, the aviation industry benefited from international low crude oil prices but at the same time, it was adversely affected by exchange rate fluctuations,” China Eastern said, adding average jet fuel prices fell by nearly 40 percent. China Eastern is headquartered in the China Eastern Airlines Building on the grounds of Shanghai Hongqiao International Airport in Changning District,Shanghai, China.
It is a major Chinese airline operating international, domestic and regional routes. Its main hubs are at Shanghai Pudong International Airport and Shanghai Hongqiao International Airport.
Moving forward, the June opening of a new Disney theme park in commercial hub Shanghai could help airlines despite wider economic weakness, analysts said.
“The slow economy does have an impact on airline companies,” Yu Nan, an analyst at Haitong Securities, told. “The opening of the Disney park might boost the business of airlines in the third quarter.”

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