Chinese carriers post losses despite passenger traffic increases

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Published: April 13, 2012

Chinese carriers at Beijing International. By Rob Finlayson

Chinese carriers reported a net loss of almost CNY200 million ($ 31.6 million) in March, reversed from a collective net profit of CNY1.71 billion in the year-ago month, due to high fuel prices and a decline in cargo traffic.

Passenger boardings increased 8.6% to 25.03 million, up 8.3% on domestic routes and 12.8% on international routes compared to the same month in 2011. Cargo traffic dipped 6.1%, up a slight 0.4% on domestic routes and plummeted 18.3% on international routes.

Industry analysts said market demand started to pick up in April with continuous domestic economic growth and slow global economic recovery but rising fuel expenses still remain a major challenge.

Fuel costs rose 16% in March, an increase of CNY1.64 billion over the same period last year. Analysts said that fuel surcharges revenue, which was CNY1.17 billion, was not enough to offset rising fuel expenses.

Earlier this month the Chinese government has raised domestic jet fuel prices to CNY8,061 ($ 1,275) per ton, up 4.35% from CNY7,725 per ton (ATW Daily News, April 6).

“In the first quarter, domestic carriers increased operating expenses [mainly fuel costs] by 22%, which has a big negative impact over Chinese airlines’ financial performance. To make matters worse, domestic carriers got less exchange gain this quarter over the year-ago quarter,” Great Wall Securities aviation analyst Liu Kun said.

It is widely expected that financial results of domestic airlines will improve in the third quarter.

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