The drop in air fares on the mainland will narrow in the second half of the year as demand on domestic routes shows signs of a rebound, Air China said.
The Beijing-based carrier saw a 9 per cent drop in revenue per passenger per kilometre flown, better known as passenger yield, to 60 fen from 66 fen a year earlier, as the anti-corruption campaign launched at the end of last year trimmed demand for business and first-class travel.
"We expect the drop will be less in the second half as demand in the domestic market has bottomed out and Air China will increase capacity on long haul flights," said Gao Lihua, general manager at the accounting and settlement department for Air China, at a press conference in Hong Kong yesterday.
Air China is the only carrier among the big three airlines that managed to break even in its core business in the first half, analysts said.
China Southern Airlines posted 344 million yuan in net profit, helped by a handsome 1.5 billion yuan exchange gain but translating to a 1.2 billion yuan loss in its underlying business. China Eastern Airlines will report today.
Air China has turned the corner with narrower price discounts since June, said Davin Wu, a transport analyst at Credit Suisse. Any sign of economic stabilisation and upcoming visa policy changes by Thailand and South Korea could be a catalysts to its stock, he added.
Gao said the capacity of transpacific routes will grow 40 per cent in the second half from the first half of this year. More flights would be added to Central America, he added.
Air China has yet to relaunch fuel-hedging measures because they are pending approval from the regulator. "We have adopted various measures, including rejuvenating the fleet to increase the fuel efficiency and cut down fuel costs," said Fan Cheng, vice-president for Air China. He expected the geopolitical tension in Syria will only be a short-term overhang for oil prices.
Fan said Air China is closely monitoring the development of budget carriers in the mainland but it has no immediate plan to tap into the market.
Beijing is expected to roll out an incentive programme to encourage low cost carriers because the penetration rate of air travel is still low in the mainland.