Currency gains help keep Air China in the black

Yuan appreciation has continued to help mainland carriers stay afloat, with Air China yesterday reporting a 9.7 per cent increase in first-half net profit to 1.14 billion yuan (HK$1.43 billion).

The Beijing-based carrier could only break even in its core business thanks to the 1.1 billion yuan in exchange gains.

Yuan appreciation in the period reduced its US dollar-dominated debt and resulted in a paper gain.

The anti-corruption campaign launched by Beijing has taken a toll on premium traffic on the mainland and Air China saw a 13 per cent year-on-year drop in its passenger yield, which measures the income per passenger per kilometre flown. This compares with a 10 per cent fall in passenger yield at China Southern Airlines, which focuses more on the mass market.

Net profit margin dropped to 2.5 per cent in the first half, from 5.44 per cent in 2012. The diplomatic tension between China and Japan over disputed islands in the East China Sea also dampened travel to and from Japan, which used to offer lucrative routes for Air China.

New tax reforms on the mainland also trimmed its revenue by 6 per cent to 45.86 billion yuan.

Air China exerted stringent cost controls in the period, with its operating cost increasing only 0.37 per cent to 39.5 billion yuan.