China Eastern Airlines, one of China’s three aviation giants, recorded a drop of 65% in first-half profit due to travel slowdown both internationally and domestically as well as to rising fuel costs and yuan loss.
SHANGHAI – After Air China and China Southern Airlines, China Eastern Airlines is the third major state-owned airline to also announce a consequence drop in earnings for the first half of 2012. The carrier reported last Thursday a 65% drop in profit due to slowing demand for air travel, higher jet fuel prices and foreign exchange losses. In a statement, China Eastern management indicates that “the air transportation market is subject to further lackluster demand arising from the European debt crisis and the downturn of the U.S. economy, plus the reduced demand from traditional export markets in Asia Pacific region and the slowdown in China’s economic growth”.
Profit fell to CNY 806.9 million (US$ 126 million), down from CNY 2.3 billion a year before. A growth of 5% in revenues was largely annihilated by a 10% hike in fuel prices but also by a rise in airport fees, maintenance costs and wages. The slight weakening of the local currency the Yuan deteriorated further the airline’s financial balance by an estimated CNY 228 million.
The airline does not expect any improvement over the next few months citing “various challenges ahead” as China is facing its biggest drop in economic growth for the last three years. GDP could this year progress by “only” 7% to 7.5%, far from previous growth rates of 9% to 11%.
Meanwhile, China Eastern will strengthen its network to Japan as the carrier anticipates further recovery from the local travel market. China Eastern already serves 16 destinations in Japan and will launch on October 18 a new Shanghai Pudong – Sendai service with four weekly service on board Airbus A320 aircraft. The airline will also add on October 28 a fourth daily service from Shanghai Pudong to Nagoya route. The flight will also be served by an Airbus A320 aircraft. China Eastern also adds this winter a third daily frequency from Shanghai Pudong to Fukuoka and boosts by one additional weekly flights the number of its frequencies to Hiroshima (10 weekly flights instead of 9), to Matsuyama (4 instead of 3) and to Nagasaki (3 instead of 2).
Luc Citrinot a French national is a freelance journalist and consultant in tourism and air transport with over 20 years experience. Based in Paris and Bangkok, he works for various travel and air transport trade publications in Europe and Asia.
