News
Mainland carriers report first-half results
September 2nd 2016
It’s reporting season on the Mainland. Flag carrier, Air China, on Wednesday said its first-half net profit fell 12.5% year-on-year, to 3.46 billion yuan ($518 million). Read More » The airline incurred 1.7 billion yuan in foreign exchange losses for the six months to June 30 when the yuan dropped 2.3% against the greenback. The depreciation overshadowed a 19% reduction in fuel costs and a 7.3% increase in passengers carried. The Beijing-headquartered carrier registered a 4.3% yield decline during the period, significantly lower than the 11% drop announced by Hong Kong’s Cathay Pacific Airways, in which it holds a 30% stake.
On Tuesday, Shanghai’s China Eastern Airlines also blamed currency losses for dragging down its first-half net profit by 9.3%, to 3.23 billion yuan. Guangzhou’s China Southern Airlines said its first-half net profit dropped 10% year-on-year, to 3.12 billion yuan ($467 million) as sales improved 1.4%, to 54.1 billion yuan and passenger boardings increased 2.2%. China Southern carried 1% more passengers on its domestic routes and its international operations increased by a steep 30%. Asia’s largest carrier by the number of passengers carried incurred a foreign exchange loss of 1.5 billion yuan during the first six months of the year, a 10-fold surge that compares with the 5.95 billion yuan currency loss reported for the full 2015 year.
"We actively responded to drastic fluctuations of exchange rate [when we], optimized the currency structure of liability. Through advanced repayment of U.S. dollar liabilities and the swap of U.S. dollar obligations under finances leases, the proportion of U.S. dollar liabilities was reduced," China Southern said, and added it "will carry out hedging operations when fuel prices reach the ideal level". Mainland carriers have rarely hedged up till now.
The airline will retire its remaining three B737-300s, ten B757-200s and four B777-200s by 2021. It has a large order book, including significant commitments for A320neo, B737 MAX and B787 aircraft.
In its latest expansion effort, China Southern has applied for thrice times a week traffic rights between Guangzhou-Urumqi-Vienna with A330s or B787s from December and upgraded its Guangzhou-Kathmandu operations daily.
Hainan Airlines, China’s fourth-largest carrier, posted 4.4% first-half profit growth, to 1.67 billion yuan. The airline reported a 14.3% year-on-year revenue improvement to 19 billion yuan and that operating expenses rose 15%, to 17.5 billion yuan.
For the six months reported, the HNA Group carrier flew 22.32 million passengers, an increase of 20.4%, and had a stable load factor of 88.2%. The carrier has added nine aircraft to its fleet, which produced an ASK expansion of 23.4%.
Spring Airlines, the Mainland’s first independent low-cost carrier, had a good first half. The Shanghai-based carrier earned a net profit of 740 million yuan, up 19.5% year-on-year. Operating costs increased 4.1%, to 3.53 billion yuan, and ASKs grew by 8.5% as eight new A320s were added to the fleet.
The budget airline carried 6.57 million passengers in the half year,an increase of 4.2% from a year earlier, and its load factor averaged 92.96%.
"In the first half of 2016, there were complex domestic and international situations, and continued downward pressure on the larger economy. Nonetheless, there was a moderate expansion in demand," Spring said in a statement to the Shanghai stock exchange.
The airline operates 63 A320s on 122 routes, including to 50 international destinations. It expects to accept three more A320s by year end.
In Jinan, Shandong Airlines on Tuesday announced an interim net profit of 283.7 million yuan, up 31% compared with the corresponding year-ago period. Shandong also incurred 11% higher operating costs, largely due to foreign exchange losses. The airline carried 8.77 million passengers for the six months, an increase of 10%, and its load factor averaged 76.2%. The Air China subsidiary operates 95 single-aisle aircraft, including 90 B737-800s.
