ATW Daily News

Chinese carriers return to profit; concerns remain over competition, fuel

Thursday January 14, 2010

Chinese airlines earned a collective profit of CNY7.4 billion ($1.08 billion) in 2009, a big turnaround from the CNY31.8 billion net loss suffered in 2008, CAAC Vice Minister Wang Changshun revealed yesterday at the regulator's annual conference.

Total operating revenue was CNY212 billion. Industry analysts are crediting the recovery of the domestic economy, government subsidies and the revival of the civil aviation construction fund for the improvement. Hedging gains resulting from rising fuel prices have helped as well. Passenger boardings climbed 19.7% to 230 million and cargo volume rose 9.3% to 4.5 million tonnes.

Looking into 2010, Wang said he is optimistic about the industry's prospects owing to the improved economic situation, the upcoming Expo 2010 in Shanghai and November's Asian Games in Guangzhou. CAAC expects passenger boardings to rise 13% to 260 million, while cargo traffic should grow 12% to 5 million tonnes.

But he warned that "challenges still remain," including high fuel prices, the yuan to US dollar exchange rate and the increasing impact of China's new high-speed rail network on domestic flights (ATWOnline, Nov. 13, 2009).

Wang said Chinese carriers' global competitiveness remains quite low. "Passenger boardings still suffered from negative growth on international routes last year and have yet to recover to pre-crisis levels from 2007," he noted. "We are still in a disadvantageous position when competing against foreign carriers in some major international markets. In addition, the open skies agreement that is expected to be signed between Japan and US in October will pose a stiffer challenge on our international routes." The regulator vowed to continue encouraging the launch of international services through subsidy distribution.

Meantime, CAAC plans to continue controlling capacity increases. Chinese carriers collectively added 158 aircraft last year, 40 fewer than originally planned. The total fleet numbered 1,417 on Dec. 31. This year airlines plan to add 208 aircraft and phase out 17. In addition, CAAC noted it would exert strict control on approving the launch of new carriers.

by Katie Cantle

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