Mainland China-based airlines carried 77.61 million passengers in the first five months of the year, climbing +7.3% over the same period last year. This according to the General Administration of Civil Aviation of China (CAAC).

Domestic passenger numbers hit 71.69 million, up 7.6% year-on-year, while international passengers increased by 4.8% to 6.6 million.

In May, passenger traffic dipped -1.1% year-on-year to 15.36 million.

The average passenger load factor in May was 70.9%, down by 2.8 percentage points from a year earlier.

The five-month load factor was up 0.7 percentage points at 65.2%.
Source: The Moodie Report

Chinese airlines said the current increase in jet fuel surcharges was not expected to bring much benefit for them.

CAAC has allowed Chinese airlines to increase surcharges to:

RMB80 (about $11.66) from RMB60 for domestic flights of 800 km or less.
RMB150 (about $22) for domestic flights longer than 800 km.

This was the fourth time that the Chinese aviation regulator has raised surcharges since August, 2005, and the second time within eight months.

Luo Zhuping, a director of China Eastern, one of the country’s major carriers, was quoted by the Guangzhou Daily as saying, ‘There is not sufficient air traffic demand now. Despite the rise in fuel surcharges, airlines will have to make more discounts in order to compete for passengers.’

Wen Shuang, of a tourism company based in South China’s Guangdong Province, said the increase in jet fuel surcharges was not expected to cause notable fluctuations to air ticket prices for tourists. He said, ‘The fuel surcharges rise, but air tickets are declining.‘

Liu Shaoyong, chairman of China Southern Airlines, noted that jet fuel costs account for more than 40% of China Southern’s total cost.

The airlines’ operation cost increased by RMB15 billion a year because of oil price rises.
Source: China View

It is almost certainly a combination of events which has brought down the number of air travelers. Bad weather, the Sichuan earthquake, higher fares due to fuel increases have all played their part. This development has significant ramifications for its domestic and international airlines and airports.

A 10% fall in Air China’s international and domestic traffic in May followed reductions in April with Air China’s load factors dropping as capacity continues to grow.
China’s biggest domestic carrier, China Southern Airlines, reports domestic passenger numbers were down 0.1% in May, its first monthly reduction since the SARS outbreak five years ago.

Chinese carriers are, of course, not the only ones affected.

Finnair recently described its May 2008 traffic figures as ‘gruesome’, adding, ‘demand has dropped, especially on Chinese routes’ and attributing the causes to the Sichuan earthquake and restrictions on travel.

There are exceptions. Hong Kong’s Cathay Pacific expanded faster in May than in any month since the mid-2004 post-SARS year-on-year catch-up.

Cathay expanded capacity by 16% last month and traffic more than matched the increase, leading to a 2.3 percentage point increase in passenger load factor to 77.4%.

Cathay does not record the effect of this on its yields, but is ‘cautiously optimistic’ about passenger demand heading into the summer peak season.
Source: The Australian

In the story below Boeing expresses its regrets that 60 748 Dreamliners had been delayed. In truth, it might have to express its regrets that a lot of those orders have been cancelled.

The airline fuel price crunch, which IATA CEO Giovanni Bisignani called ‘an extraordinary crisis,’ is having its effect on China aviation.

China Eastern Airlines will cut flights to Asian, European, African and American destinations due to rising costs.
China Southern Airlines will cut flights from Guangzhou to Ho Chi Minh City, Hanoi, Angkor, Hong Kong, Seoul and Singapore for the months of June, July, August and September. Flights to Seoul, Los Angeles, Paris, Sydney, Jakarta, Lagos, Dubai, Delhi, Fukuoka and Penang will be cut as well.

Luo Zhuping, board secretary of China Eastern, said the company is considering cutting international flights but the reduction will be gradual.He said, ‘Besides the soaring fuel prices, a major pressure is from the declining domestic and international market demand arising from the weaker international economy.’

Two other major airlines, Air China and Shanghai Airlines, have said they had no plans to trim flights at the moment but will take other actions to reduce costs.

Air China’s costs will rise by RMB300 million ($43.22 million) if the price of fuel goes up by RMB100 per ton. But Wang Kai, from the board secretary’s office in Air China, said the company will not cut flights because of its high occupancy rate. Air China’s occupancy rate for international flights was 74.8% in the first four months of this year, higher than China Eastern’s 66%.

Wang Kai said, ‘Air China can cover around 70% of extra costs through aviation fuel hedging, fuel surcharge and internal fuel-saving measures,’

Wang Wanlong, spokesman for Shanghai Airlines, said the company isn’t under much financial pressure from rising fuel prices because of its limited number of flights. Shanghai Airlines has less than 10 international flights, much less than 98 international routes China Eastern serves.
Source: China Daily and BizChina Update and China Daily

In China aviation there is an odd paradox. While all over the world air fares are climbing, routes are being cut and services terminated in China the fares to elsewhere are very low. Indeed, as low as they have been for some time. This will not last long.

It is possible, as suggested by Fons Tuinstra of China Herald that these latest price cuts are due to the restrictive visa policies which have hurt inbound travel to China.

At the same time some other airlines flying to other parts of Asia are also hurting. On the golden route London-Bangkok-Sydney the load factor has been a consistent 100% for so long it was thought to be immutable. Wrong. Flights now have spare seats. On a BA flight to Bangkok last week the writer had three seats to himself. And that has not happened for many years.

And despite the low prices being quoted on long flights at the moment the affects of the price of oil in there if you care to look for them.

Some Chinese carriers are cutting flight capacities to trim losses. Apart from totally suspending routes from Guangzhou to Ho Chi Minh City, Hanoi, Angkor, and Phuket, China Southern is also reducing capacity on its flights to 11 international destinations, including Los Angeles, Paris, Sydney and Singapore.

Loss-making Shanghai carrier China Eastern is set to follow suit.

Hong Kong International Airport is worried that direct travel links between the mainland and Taiwan could cause it to lose 6% of its traffic and about HK$3 billion in travel revenue each year. Perhaps more if Chinese airlines decide to trim their flights.

There will be much, much more of this before the party is over.
Source: Shangiist