Air China posts 60pc rise in Q3 profit, bolstered by falling operating and finance costs

Air China, the national flag carrier, announced on Thursday that its net profit for the third quarter rose 60 per cent, helped by rising revenue and falling costs for financing and other expenses.

Profit rose to 3.77 billion yuan for quarter from 2.33 billion yuan over the same period last year, shy of analysts forecasts of 3.938 billion yuan, as compiled by Bloomberg.

Against the year-earlier period, quarterly revenue rose 2.2 per cent to 31.92 billion yuan, while operating costs fell 6 per cent to 27.0 billion yuan.

Meanwhile, finance expenses dropped 67 per cent to 1.35 billion yuan, compared to 4.12 billion yuan a year earlier.

For the first nine months, revenue gained 3.7 per cent to 85.45 billion yuan, while operating costs totalled 76.33 billion yuan compared with 75.60 billion yuan in the year earlier period.

China East Air, one of the three largest carriers in China, said Thursday its net profit for the first three quarters rose 25.5 per cent to 6.69 billion yuan compared to 5.33 billion yuan in the same period last year.

In an inaugural report on the Chinese airline sector, Macquarie Capital analysts Eric Zong and Janet Lewis said they were bearish on the sector, in contrast to the consensus among the analysts community.

“The ambitious capacity targets set by the big three Chinese carriers will result in another year of falling yields next year as congested main airports in China will push airlines to seek growth from secondary airports, in our view,” the analysts said.

Macquarie initiated its coverage on Air China with a neutral rating, while China Eastern and China Southern were assigned underperform ratings.

“Runways are fully utilised and air space control remains tight in the main Chinese airports. Thus the big three Chinese airlines must find growth elsewhere to achieve ambitious capacity targets. Given the lengthy infrastructure development process, we do not expect meaningful improvement to the current situation at major airports in the medium term.”