Air China, China Eastern report higher profits, growth

Air China, China Eastern report higher profits, growth

   Air China and China Eastern Airlines, two of the Chinese mainland’s three biggest airlines, posted improved profit results for 2004, but warned they will incur higher oil prices in 2005.

   Beijing-based Air China increased its net profit 29-fold to RMB2.6 billion ($308 million) in 2004 over its results in 2003, when it had been hit by the SARS crisis. Its revenue jumped 36 percent to RMB33.5 billion ($4.1 billion), but cargo and mail revenue were down 28 percent to RMB3.2 billion ($383 million) due to changes in the accounting treatment of its cargo business. Air China Cargo Co. Ltd., which is    engaged in cargo operations, was transformed from a previous branch of the company into a joint venture in 2004, which resulted in proportionate consolidation in the accounts.

   Shanghai-based China Eastern returned to the black last year, with a net profit of RMB514 million ($62 million), from a loss of RMB950 million in 2003. China Eastern’s total revenue soared 47 percent to RMB21 billion ($2.5 billion) in 2004, with the cargo and mail portion of its revenue rising 39 percent to RMB4.4 billion ($535 million).

   China Eastern also reported that its yield per freight ton-kilometer on international routes declined 5 percent to RMB2.49 (30 cents) in 2004.

   This year, China Eastern plans to continue its strategy of developing its cargo transport business. Based on Shanghai Eastern Logistics Co., Ltd. a newly established subsidiary, the airline said it will build up a cargo transshipment network in Shanghai, with a view to establishing a logistics network for the Yangtze River Delta.

   Both Chinese airlines cited forecasts of continued strong growth in China.

   “The greatest opportunity is that (the) Chinese economy is now in a prime strategic opportunity period of growth,” Air China said in a statement. “In the coming three years, the demand for air transport will keep growing at an anticipated rate of 13 percent to 15 percent.”

   China Eastern expects “general favorable domestic economic conditions” in 2005. “The aviation industry of China will benefit from … such factors as the steadfast growth of China’s economy, the rising domestic consumption demand, the trade expansion and the increase in business activities resulting in increase of domestic customers’ demand,” it said.

   However, China Eastern said the volatility of international oil prices, the loosened restrictions on market entry as a result of the restructuring of the domestic air transport sector, and the further decentralization of aviation rights “will certainly lead to intensified competition.”