China Southern Airlines, China’s biggest carrier, said its third quarter net profit rose 49% to RMB1.88 billion from a year ago as rapid economic growth on the mainland boosted demand for travel.

It will acquire 10 new aircraft by 2010 as part of its plan to expand its overseas routes.

The airline carried 42.7 million passengers in the first nine months of this year, 15.5% more than the same period in 2006, the company said earlier this month. Cargo volume jumped 6.2% to 639,980 tons.

China Southern plans to start flying at least 10 new overseas routes before the Beijing Olympics in 2008, taking on rival Air China, the mainland’s largest international carrier.

Jimmy Wong, an aviation analyst with Nomura International said, ‘As of now, only 20% of China Southern’s revenue comes from international routes, so their main focus is the domestic market. But with the Chinese aviation industry posting double-digit growth numbers this year it is essential for the airline to expand.’

In the last 12 months, China Southern has entered into agreements to buy 80 Boeing B737-700/800s and 20 Airbus A320-series aircraft. China Southern plans to expand its fleet of over 300 aircraf t by 22% this year. The airline has a third of the Chinese aviation market.

China Eastern Airlines is now flying operations which will eventually link Indian cities like Mumbai and Bangalore to China.

Ginger Jiang Wei, the Indian representative for China Eastern, said, ‘We are eyeing the Indian metros where the passenger airline traffic is growing at a fast pace. Mumbai and Bangalore figure prominently on our radar. Apart from the business delegations, there has also been a significant growth in Indian tourists to China.’

However, he was unable to say when services from Mumbai and Bangalore to Shanghai might be restored.

Chin Eastern, which had flight operations from Mumbai, in 2005 discontinued the service. Now it is running three non-stop flights per week between Kolkata and Kunming.

Ginger Jiang Wei said, ‘We chose Kolkata owing to its geographical proximity to Kunming. Kunming is a known tourist hub and we are looking to cash in on the growth of the tourism traffic from India to China. China is now emerging as an alternative destination to the South-East Asian countries for the Indian travelers’.

The tourism traffic from India to all airlines is growing at the rate of around 35-40% a year.
Source: Business Standard

Most analysts when taken to one side will allow that 50% accuracy is considered reasonable. So when Merrill Lynch cut its 2007 operating profit forecast on Asian airline operators by 5% following a 25% surge in jet fuel costs over the last three months it may well be right, or not.

If you average out air travel prices and then average out income growth you find one is going up faster than the other. And it is income growth — or, if you prefer, potential air travelers — ahead of the race.

At the same time operating profits at various Asian airlines grew 70% in the nine months ended September.

It goes on to say that airlines in China, Hong Kong, Korea and Taiwan are at a disadvantage compared with their peers as their fuel surcharges are set by their regulators.

Merrill Lynch analysts Paul Dewberry and YingYing Hou, aid, ‘The level of surcharge in these territories remains well below those airlines based in Southeast Asia and Australia who are generally free to adjust their levels when they wish.’

Mild confusion here. The analysts are saying that, say, Qantas operates at an advantage because it can add the cost on and call it a fuel charge but that similar airlines based in Southeast Asia have to include it in the price which is sort of fixed. In a sense this is true and it does have an effect on the operating profit.

For example the brokerage thinks China Southern Airlines, the nation’s largest carrier by fleet size, will have it operating profit dropped by 11% to RMB1.19 billion. And it has reduced Cathay Pacific Airways’ operating profit forecast by 7%.

However, it has increased its operating profit forecast on other airlines due to better oil price hedging.

Last week China Southern shares announced its third quarter net profit rose 49% to RMB1.88 billion as rapid economic growth on the mainland boosted demand for travel. And we have ahead the Olympic Games and then Shanghai 2010. Suppose, yes, airfares do go up. Will passenger load diminish because of it? Seems dashed doubtful. The splendid illustration shows a line of intending passengers. A small air far rise will not change their minds.
Source: Centre for Pacific Aviation

China will continue to have three major airlines according to an official view reported in the Wall Street Journal.

Yang Yuanyuan, minister of the General Administration of Civil Aviation of China, on the sidelines of the 17th Communist Party Congress said, ‘We believe it would be fine to maintain three major carriers based on the situation of the airline industry.’

The remarks come amid speculation of merger and acquisition activity among the big three — Air China (which gives us our illustration), China Southern Airlines and China Eastern Airlines. The three major airline groups were formed from a restructuring of state-owned carriers in 2002.

In September China National Aviation Holding, which controls Air China, cancelled a joint bid with Cathay Pacific Airways to take a stake in China Eastern Airlines.

However, there are some wild cards. Hainan Airlines is building itself up to be a major airline as Grand China Air with outside China investment and it will be, without a shadow of a doubt, the fourth largest airline in China.

This is not to say that private enterprise always produces a better product than State owned, although not State-run, enterprises. But it could be taken as a working rule. Which may mean the balance of power in the aviation industry may shift. Which will make life for the airline managers very interesting.
Source: Centre for Pacific Aviation

Air China said it has no plans to order the double-decker Airbus A380 jumbo jet because its fleet uses the rival Boeing 747.

Airbus executives said earlier this week that Air China was among the customers they were pursuing for the A380. But Air China Chairman Li Jixiang said Thursday that it makes more sense for the company to use just one kind of jumbo jet.

Li Jixiang said, ‘Usually it would be better for a carrier to stick to one type of big aircraft in its fleet and better to form a certain scale. Otherwise the costs would rise.’

Air China expects at least a 15% rise in passenger numbers in 2008, up from the expected 35 million to 38 million this year but, Li Jiziang said, the company’s international routes are expected to become profitable by full-year 2008.

Airbus delivered its first A380s this week to Singapore Airlines almost two years behind schedule. Airbus Chief Operating Officer John Leahy said Airbus was trying to sell its biggest jet model to Air China. Delays to a new Boeing jet, the 787, will affect just one of the 15 models Air China has ordered and Air China is seeking compensation for the delay, he added.

On the other hand China Southern Airlines, the country’s largest carrier by fleet size, has signed an agreement to buy 10 A330-200 aircraft from Airbus. And got a discount on the quoted price of $167.7 million each.