Air China's huge interim gain boosts full-year plan
Air China, the world's largest carrier by market capital, says things can only get better this year after posting a record net interim profit.
The nation's flag carrier revised upward its full-year forecast for passenger and cargo volume yesterday, despite the industry being overshadowed by high oil prices and global economic uncertainty.
The Beijing-based carrier's earnings surged 60 per cent to 4.6 billion yuan (HK$5.25 billion) in the first six months, which was at the high end of most forecasts.
Outstanding fuel hedging contracts, which resulted in hefty paper losses in 2008, generated a 577 million yuan fair value gain in the first half, while the contribution from Cathay Pacific Airways, in which Air China has a 30 per cent stake, amounted to 150.7 million yuan.
Air China's outstanding results came after China Southern Airlines posted an 82-fold jump in net profit to 20.7 billion yuan for the first half earlier this month.
As more people take to the skies in the world's fastest growing major aviation market, mainland airlines carried 152 million passengers in the first seven months of the year, up 18.2 per cent from the same period last year and nearly matching the 19.7 per cent increase for all of 2009.
Air China revised its passenger for the full year up slightly to 46.09 million yesterday from the 46.06 million it forecast in May. It also raised its cargo volume target to 1.2 million tonnes, up from 1.18 million tonnes.
The carrier's passenger total rose 17.4 per cent year on year in the first half while cargo volume rose 33.2 per cent. Revenue from the passenger division was up 48 per cent to 29.4 billion yuan while cargo sales more than doubled to 4.1 billion yuan.
Increased air fares and cargo fees pushed up the operating margin of the passenger division to 21.2 per cent and cargo to 25.6 per cent, up by 6 percentage points and 10 percentage points respectively.
'Passenger growth at Air China for the rest of the year will not be far short of the first half due to robust demand on the mainland,' said Kelvin Lau, transport analyst for Daiwa Capital Markets. But he warned of a substantial slowdown in the cargo growth in the second half due to lukewarm economies in the West.
'The recovery in demand has been faster than anticipated,' said Giovanni Bisignani, director general and chief executive of the International Air Transport Association (IATA), an airline trade body with over 230 members. 'But as we look towards the end of the year, the pace of the recovery will likely slow.'
Show of confidence
Air China's first-half earnings bode well for the full year, surging a startling 60% to reach a total of: 4.6b yuan
