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Air China still climbing after its best quarter
Charlotte So
Apr 24, 2010
Air China (SEHK: 0753, announcements, news) has bounced back from the economic crisis with its best quarterly result ever, reporting 2.17 billion yuan (HK$2.47 billion) net profit, up more than 100 per cent year on year. The airline said net profit grew 121 per cent in the first quarter, lifted by growth in domestic passenger traffic and a turnaround in international traffic and cargo business.
The result eclipsed the previous peak set in the third quarter of 2007.
Air China reported a better than expected full-year net profit of 4.85 billion yuan last year, up from a net loss of 9.26 yuan a year earlier.
Operating revenue in the first quarter rose 31 per cent from a year earlier to 14.70 billion yuan, lifted by a 15 per cent rise in passengers and a 51 per cent increase in cargo traffic.
The growth in mainland air traffic demand gathered pace in March. The number of air passengers grew 20 per cent year-on-year nationwide last month, outstripping the 14 per cent jump in the first two months.
Citigroup has predicted that the World Expo in Shanghai starting in May will add seven million to 10 million passengers for the mainland carriers, or 20 per cent to 25 per cent growth.
"We believe it may push up airfares close to full prices and trigger massive earnings upgrades on the street," the report said.
Mainland carriers have in the past suffered from price wars due to aircraft over-capacity, with airlines slashing prices by as much as 80 per cent during the low season. Since the percentage of seats sold, or the so-called load factor, rose among the carriers in 2009, they could start to restore ticket prices.
Air China, for example, saw its passenger load factor increase nearly three percentage points to 78.6 per cent in the first quarter from a year earlier. Domestic routes, which topped the other routes, registered an 81.9 per cent load factor.
The airline's air cargo business continued to grow strongly in the first quarter as the demand for high-end products from Europe and the United States remained high. Air China Cargo posted 51 per cent growth in cargo traffic to 1.04 billion tonne kilometres. The robust demand also lifted the cargo load factor by 11.63 percentage points to 57.64 per cent.
Industry experts say charter rates for a Boeing 747 freighter in Shanghai has surged to US$800,000 per trip, even higher than the US$700,000 charter rate in Hong Kong. Air China shares fell 1.3 per cent to HK$8.3 yesterday.