BIZCHINA / Weekly Roundup
Major airlines out of losses
(Xinhua)
Updated: 2007-04-07 10:09
After huge losses in 2005, Chinese airlines flew out of the turbulent
weather and back into profitable skies in 2006 despite facing hefty
increases in the cost of fuel.
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National-flag carrier Air China said in its annual report that it
recorded 3.2 billion yuan of net profit in 2006, up 87.7 percent from
2005.
Air China has been the most profitable carrier in the country for three
years in a row, thanks to its extensive international network and its
location in Beijing where the volume of traffic continues to rise as the
2008 Olympics draw near.
Guangzhou-based China Southern Airlines said earlier it had earned a
profit in 2006, the first for the carrier in eight years, but did not
reveal the actual figure.
Liu Shaoyong, general manager of China Southern Airlines, attributed the
profit to cost cutting, improved budgeting, better handling of
non-performing assets and active debt recovery.
The carrier reported losses of 1.79 billion yuan in 2005.
Shanghai-based China Eastern Airlines had a difficult time in the
fast-growing but increasingly competitive market.
After suffering losses of 970 million yuan in the nine months to
September, the carrier reported 492 million yuan of profits in the fourth
quarter of 2006 to stench the bleeding.
Investment bank Morgan Stanley previously forecast a 2 billion yuan loss
for the carrier in 2006, but the carrier's performance was better than
expected.
Hainan Airlines, which reported 216 million yuan of losses in 2005, said
in an earlier statement that a robust performance last year would allow
it to report profit for 2006.
CITIC analyst Li Lei estimated Hainan Airlines' net profit for 2006 at
between 213 million and 355 million yuan.
Analysts said that all the major Chinese airlines benefited from the
appreciation of the national currency in 2006 as their debts in foreign
currencies lost value against the rising yuan.
Feng Zhigang, an analyst with Guotai Junan Securities, told the 21st
Century Business Herald that airlines normally ran operational debts, and
the debts of Chinese airlines are often in foreign currencies because
they purchase jets, fuel oil and aeroplane maintenance services from
overseas.
China's fuel oil price was adjusted three times in 2006 to average 5,737
yuan per ton over the year, up a hefty 19 percent from 4,815 yuan in 2005.
Fuel oil is a key cost for airlines. The pressure from high fuel prices
is still impacting Chinese airlines' bottom line in 2007 despite three
small fuel oil price cuts since January.
Air China said it would continue to purchase fuel oil futures contracts
to offset risks from price hikes this year.
Li expected the country's airlines to stay profitable in 2007 as the yuan
continues to appreciate and international oil prices drop.
(For more biz stories, please visit Industry Updates)
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