April 23, 2010

Air China said its first-quarter earnings more than doubled as the domestic air travel market rebounded strongly with the recovering economy.

Air China's outlook is expected to remain bright for the rest of the year with a lift from solid air traffic growth in China, which may overtake Japan as the world's second-largest economy this year, industry analysts said.

Chinese carriers faced severe headwinds in 2008 as a slowing economy dented air travel, but the situation started to improve in 2009 helped by government cash aid, fee waivers and a warming up of the domestic air travel market.

The carrier's first-quarter earnings came to CNY2.17 billion yuan (USD$317.8 million) under Chinese accounting standards. Air China's quarterly net profit was CNY981.2 million a year earlier.

The airline reported a hefty CNY938 million gain in the latest quarter from fair value changes in its jet fuel derivative contracts, in addition to strong investment gains.

DOMESTIC TRAFFIC

"2010 will be a good year ahead for Air China and other Chinese carriers. Domestic air traffic will continue its growth pattern and even international air travel has already started to pick up since late last year," said Li Lei, an analyst with China Securities.

Air China Chairman Kong Dong gave similarly upbeat remarks earlier this month on the carrier's financial performance for 2010.

The Beijing-based carrier on Thursday also said it booked a CNY4.85 billion net profit under international accounting standards for 2009. It had been saddled with a 9.26 billion net loss a year earlier.

Chinese carriers flew 159 million passengers in 2009, up 15 percent and resuming their normal growth path after a gloomy 2008, official data showed, improving the earnings outlook for Chinese carriers which also include China Eastern Airlines and China Southern Airlines.

Air China recently agreed to set up a cargo venture with Cathay Pacific Airways to tap the country's export and import business, now dominated by foreign rivals.

The venture will also give Air China a foothold in Shanghai and help it to compete more effectively in the major air hub with China Eastern, which now has nearly half of the local market, analysts said.

They added that Air China's deal in March to increase its stake in privately run Shenzhen Airlines would enable it to better compete with China Southern Airlines, which dominates the market in south China.

(Reuters)

Source: http://news.airwise.com/story/view/1271983863.html