Air China Passenger Growth May Slow to 4.4% After Profit Slump

Source: Bloomberg News By Jasmine Wang Air China Ltd. (753), the world's biggest airline by market value, predicted that passenger growth may slow to 4.4 percent this year after reporting a worse-than- expected decline in 2011 profit. The carrier, including units, may fly 72.8 million travelers this year, compared with 69.7 million last year, it said in a Shanghai stock exchange filling late yesterday. Net income declined 41 percent last year to 7.08 billion yuan ($1.1 billion) under international accounting standards. China's biggest international carrier expects passenger growth to cool from last year's 16 percent because of economic concerns in China, the U.S. and Europe. The company also faces rising fuel costs with prices having averaged about 10 percent higher in Singapore trading in 2012 than a year earlier. "With capacity growth and weaker demand growth, the airline is likely to face difficulties in growing passenger yields," said Richard Wei, an analyst with UBS AG. "The rising jet-fuel price is also expected to hurt profit-margins further." Profit may decline 20 percent this year, he said, before the earnings announcement. Net income last year fell after the carrier's fuel expenses rose 44 percent to 34.7 billion yuan because of higher prices and increased flying. Cathay Pacific Stake The contribution from a stake in Cathay Pacific (293) Airways Ltd., Hong Kong's biggest carrier, also slumped 68 percent to 959 million yuan after year-earlier one-time gains. Air China holds about 30 percent of Cathay Pacific. The Hong Kong-based carrier also owns a stake in Air China. Air China's sales rose 19 percent last year to 98.4 billion yuan. Earnings per share fell to 0.58 yuan from 1.03 yuan. The carrier was expected to make a 2011 profit of 8.9 billion yuan, based on the average of eight analyst estimates compiled by Bloomberg. The airline's groupwide yields, a measure of average fares, increased 6.3 percent to 0.68 yuan per revenue passenger kilometer, it said in a press release. The carrier proposed a final dividend of 0.118 yuan a share, little changed from a year earlier. Its stock rose 0.8 percent to close at HK$5.12 yesterday in Hong Kong trading, before the earnings release. The carrier has dropped 11 percent this year in Hong Kong. China Southern Airline Co. (1055), the nation's biggest by passenger numbers, has fallen by the same amount and China Eastern Airlines Corp. has declined 4.4 percent. The benchmark Hang Seng Index has gained 14 percent. Air China, including units Air Macau and Shenzhen Airlines, filled 81.5 percent of seats last year with paying customers, an increase of 1.4 percentage points. On international routes, the load factor fell by 1.2 percentage points compared with a 2.8 percent rise on domestic routes. The group fleet total 432 planes at the end of last year, according to a press release. That included 288 planes in the main Air China unit. from China Travel & Tourism News http://www.chinatraveltourismnews.com/

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