Shares of mainland airlines soared in Hong Kong yesterday after the central government issued a circular aimed at boosting the aviation industry, predicting a tripling of the mainland's air transport volume by 2020.
Despite some of the airlines having issued profit warnings, airline shares were among the biggest gainers yesterday. Investors were betting the government's support would fuel the industry's growth in the medium to long term, and that falling international oil prices will help airlines in the second half of the year.
Shares of China Southern Airlines, the mainland's largest airline by fleet size, jumped 8.4 per cent to HK$3.74, those of Air China rose 4.6 per cent to HK$4.99, and China Eastern Airlines' rose 6.88 per cent to HK$2.64. Shares of AviChina Industry & Technology, an aircraft and components manufacturing conglomerate, jumped 10.16 per cent, making it one of the day's top gainers. The Hang Seng Index edged up 0.35 per cent.
The State Council's circular said air passenger and freight transport volume would grow 12.2 per cent annually to reach 170 billion tonne-kilometres in 2020, compared with 57.7 billion tonne-kilometres last year. Flight services are projected to reach 89 per cent of the nation's population by 2020, with the number of air passengers hitting 700 million, up from 293 million last year.
Capacity will expand at existing airports and new ones will be built, the document says. It promises more efforts to develop aviation as a new growth sector, and more encouragement for private jet and business jet services. 'By 2020, a safe, convenient and efficient civil aviation system will be in place in China,' it says.
Li Lei, an analyst with the China Securities Company, said: 'The document takes a longer view than the previous one issued by the administration. The industry growth rate it specifies for the next eight years is lower than what we have seen between 2000 and 2010. It's in line with the government's expectations of slower GDP growth.'
