China Eastern kept in profit by yuan gains
A handsome foreign exchange gain of 1.17 billion yuan (HK$1.47 billion) has kept China Eastern Airlines in the black, even though weaker cargo demand and discounted air fares squeezed the carrier's net profit down 28.2 per cent to 622 million yuan in the first half of the year.
The mainland's second-largest airline said demand for air travel should improve in the second half of the year, according to a filing to the Shanghai stock exchange yesterday, adding that the establishment of a free-trade zone in Shanghai and the opening of a Disney theme park in the city by 2015 would help boost air traffic in the medium term.
The carrier moved 38 million passengers during the first six months of the year - a year-on-year increase of 9.2 per cent - but the volume of cargo it handled fell 3.03 per cent to 662,000 tonnes.
Analysts said slower economic growth, fewer business travellers and a bird flu scare in eastern China in April had hit the aviation industry in the first half. They said China Eastern would have suffered a loss without a net foreign exchange gain of 1.17 billion yuan from appreciation of the mainland currency.
The group's operating profit fell 93 per cent to 134 million yuan.
Guangzhou-based rival China Southern Airlines saw its net profit fall 21 per cent to 339 million yuan in the first half despite a 1.5 billion yuan gain from the yuan's appreciation. Air China's net profit jumped 9.8 per cent to 1.14 billion yuan in the same period.
Shanghai-based China Eastern said it had strengthened its presence in the city's air hub after acquiring Shanghai Airlines. It had also implemented stringent cost controls and redeployed capacity - such as replacing flights to Japan with long-haul flights to the United States and Europe after a territorial dispute between Japan and China cut air traffic between the two nations - which had helped buoy sales.
The carrier's revenue jumped 2.66 per cent to 41.45 billion yuan, but its gross profit margin fell 4.65 percentage points to 6.99 per cent.
China Eastern, which is teaming up with Australia's Qantas to launch budget airline Jetstar Hong Kong, bought 20 new aircraft in the first half of the year.