Sizable losses for China's airlines in first half of year

Airlines in China posted a significant annualized loss during the first half of 2013, taking a hit from a weak economy, the H7N9 outbreak and increased competition from foreign rivals and budget airlines, according to Shanghai's First Financial Daily. Their combined operational losses exceeded 4 billion yuan (US$652 million) after exchange gains were deducted. Business for four listed airline companies may remain weak even during the middle of the year. Figures compiled by the Civil Aviation Administration of China said total freight volume stood at 31.87 billion tonne-kilometers (ton-km) for the first six months of 2013, growing by 10.4% year-on-year. Passenger volume rose by 11% year-on-year to 170 million. Data indicated that cargo volume was up 3% at 2.63 million ton-km compared with the same period last year. However, the prospects of the aviation industry maintaining profitability appear less likely. During the same period, airlines' operational losses were 4.19 billion yuan (US$683.5 million). But they still profited during this time, owing to earnings of 4.33 billion yuan (US$706.4 million) because of exchange gains. "The actual situation in the first half of this year was worse than our expectation at the beginning of the year," an industry analyst told the paper. Additionally, a lackluster macroeconomy has weakened air freight demand. The competition between airlines had led to ticket price reductions, which also dragged down their profitability. China Eastern Airlines general manager Ma Xulun stated that operations during the first quarter were weakened by the global economic downturn. Moreover, the outbreak of avian flu had also affected passengers' willingness to travel. As for the back half of the year, the aviation industry has a positive outlook, forecasting stronger operations than during the first half of the year. However, airlines might not benefit from exchange gains during the next couple of months and are likely to face exchange losses, because the withdrawal of US quantitative easing policies might slow down the appreciation of the renminbi. In recent years, international and budget airlines in particular have accelerated their entry into China's domestic market. At present, 13 airlines now fly to China's second- and third-tier cities. "Foreign airlines have begun to penetrate markets in the second and third-tier cities. Since the internationalization of domestic companies has just got started, their international sales and network connection still trail behind their foreign counterparts," an industry source told the paper. Source: Want China Times  from China Travel & Tourism News http://www.chinatraveltourismnews.com/

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