Chinese airlines' profit hit by fuel costs, weak yuan

[SHANGHAI] China's major airlines mostly saw their earnings battered in the first half of the year as a weaker Chinese yuan and higher fuel prices offset steadily rising passenger traffic.

Net profit at China Eastern Airlines for January-June plunged 48 per cent on-year to 2.3 billion yuan (S$460.6 million), the company said on Thursday in a statement to the Hong Kong stock exchange, where it is listed.

"China's civil aviation industry continued to maintain a rapid, above double-digit growth rate, yet also faced challenges such as a sharp rise in fuel prices, large fluctuations in... exchange rates and intensifying market competition," the Shanghai-based carrier said.

China Southern Airlines, Asia's largest carrier, said earlier in the week that profit slumped 24 per cent to 2.1 billion yuan. However, it said revenue grew 12 per cent and it posted similar gains in passenger numbers, the latest in what has become routinely good news in the underlying business of Chinese airlines.

Flag carrier Air China bucked the trend, posting a 4.05 per cent profit gain to 3.5 billion yuan.

Air China noted, however, that fast growth in transport capacity may have outpaced demand during the period.

The three government-controlled airlines have ramped up their presence in the booming domestic market after previously expanding overseas routes.

China is now the world's second-largest aviation market, and increasing demand for air travel among its growing middle class is expected to ultimately push it past the United States.

Last year, American Airlines, the world largest carrier by scheduled passengers, bought US$200 million worth of China Southern stock, or 8.8 per cent of its Hong Kong-listed shares, to seal a planned "long-term relationship".

The tie-up will allow American to tap into the Chinese market, while boosting China Southern's ambitions of raising its global profile.

AFP