Airlines' Q1 profits gain high altitude

Updated 2018-05-21 13:33:04 China Daily

Major airlines in China reported strong first-quarter earnings growth as surging travel demand and yuan appreciation helped offset adverse factors such as rising oil prices, industry insiders said.

Air China netted 31.61 billion yuan (.96 billion) in sales revenue, up 9 percent year-on-year. Its net profit soared 79 percent year-on-year to 2.63 billion yuan, according to its latest earnings report.

China Southern Airlines, the country's largest carrier by passenger traffic, also reported an improvement in its performance. The Guangzhou-based airline said its first-quarter sales revenue was 34 billion yuan, up 10 percent year-on-year, which yielded a net profit of 2.54 billion yuan, up 64 percent year-on-year.

China Eastern said its first-quarter sales revenue was nearly 27 billion yuan, up 9 percent year-on-year. But net profit fell nearly 30 percent to 1.98 billion yuan as the carrier stripped its freight business last year as part of a structural reform for mixed ownership.

Meanwhile, the rising oil price has had a big impact on some major carriers. China Eastern said its total operating costs rose by nearly 10 percent year-on-year in the first quarter, and aviation fuel costs climbed nearly 19 percent year-on-year, driven by the oil price rise as well as usage increase.

"Despite the oil price rise, major airlines posted positive growth in the first quarter, fueled by the continuing high demand from the market," said Lin Zhijie, an aviation industry analyst and columnist at Carnoc, one of China's largest civil aviation news websites.

"Owing to the saturation of airspace resources, it's hard for carriers to further add capacity. The supply tends to become increasingly hard to meet the demand, and this has led to an increase in the price of flight tickets and income growth for operators," he said.

Earlier this year, the Civil Aviation Administration of China allowed carriers to introduce the variable ticket price system on 306 additional routes, including the flights that connect major first- and second-tier cities.

"Air China has made related price increase plans and we are waiting for the approval of the authorities. In the peak seasons of summer and fall, we are likely to adjust the prices for more than 30 routes," Luo Yong, general manager of the marketing department of Air China, said.

The airline said it will adjust prices on more trunk lines later this year, as customers are less sensitive about the prices on such routes and the demand remains robust.

China Eastern said it has started to adjust the prices of the first batch of five flights, including the flights between Harbin and Xi'an, and Chengdu and Taiyuan. China Southern said it will adjust the prices for more than 50 flights, accounting for 30 percent of its domestic capacity.

In addition, the passenger transport volumes of major carriers are growing rapidly. In the first quarter, Air China, China Southern and China Eastern saw the numbers of their passengers grew 7.8 percent, 9.79 percent and 7.7 percent, respectively.

By 2020, it is expected that China will transfer 720 million people by air annually, meaning during the 13th Five-Year Plan period (2016-20), the domestic aviation market will grow by 10 percent every year on average, according to the Civil Aviation Administration of China.

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