China Eastern inflight service

Loss-making China Eastern airlines could be sounding a warning most of the rest of the world does not want to hear.

It had operating losses of close to $US1 million ($1.15 million) a day in the first half of 2008.

In a statement, the Shanghai-based airline said it faced an ‘extremely complicated operating environment’ in the second half, with ‘increasing uncertainties in the global economy, while the Chinese economy will probably experience a slowdown under the macroeconomic adjustment policy’.

One could excuse China Eastern for being gloomy about the outlook. After all, it narrowly missed out on securing a white-knight investor in Singapore Airlines (SIA) earlier this year, only to be battered by snow storms, earthquakes and Olympics security clampdowns which, by July, had slashed its international passenger traffic by almost a third.

China Eastern concludes that air travel demand is ‘likely to experience a downturn, while pressure from ever-increasing costs is likely to pose a threat to the development of the air transport industry’.

This is the first official indication by a Chinese airline that the much-hoped-for post-Olympics recovery may not materialise. For China Eastern, the next steps could involve a government bailout, domestic consolidation or both. More on this HERE.
Source: The Australian

Embraer 190

Brazilian aircraft manufacturer Embraer has signed a five year contract with China’s Kun Peng Airlines to supply spare parts. Embraer said the contract will make it possible to automatically replace parts and reduce delivery times, the Brazilian manufacturer said in a statement, adding that it would allow the Chinese company to better manage maintenance costs, with reduced planning, control and acquisition of parts.

In 2003, Embraer set up a joint venture to manufacture aircraft with China’s AVIC II (soon to be combined with AVIC I to make one company) in Harbin, northern China and Hafei Aviation Industry.

Located in the capital of Heilongjiang province, Harbin Embraer Aircraft Industry builds aircraft for the Chinese market, with identical models to those manufactured in Brazil, in the city of Sao Jose dos Campos, some 90 kilometres from Sao Paulo.

Kun Peng Airlines is a joint venture between Chinese company Shen Zhen Airline, which has a majority stake, and the Mesa Air Group of the United States and in July 2008 it made a firm order for five Embraer 190 jets.
Source MacauHub

Chinese airlines' problems

Shares in airlines, once the darling of the market, have plunged dramatically.

Mutual funds sold RMB12.7 billion  ($1.85 billion) worth of airlines shares in the first quarter of this year and dumped another RMB7.3 billion  of shares in the second quarter.

Shares in China Southern Airlines accounted for about 40% and Air China accounted for 48%.

Ma Xiaoli, an analyst with CITIC Securities, said, ‘A weak economy, tightened visa regulations during the Olympic Games and the devastating earthquake in Sichuan Province all dampened demand for air travel, more than we expected/’

Air China handled 2.98 million passengers last month, dropping 6.8% from a year earlier, with the load factor decreasing 8.1% to 73.3%.
China Southern’s passenger volume dropped 2.3% and the load factor slid 1.4% to 75.1%.

Ma Xiaoli said, ‘The third quarter will still be an off-season for the aviation industry, but we expect that the market will recover in the fourth quarter and grow faster next year since some negative effects were one-off.’
Source: Shanghai Daily

American Airlines

American Airlines is seeking to delay by a year its planned Chicago-Beijing service which was set to begin in April 2009.

The largest US carrier said it today filed a request with the US Department of Transportation for a waiver to allow it to begin service between Chicago O’Hare International Airport and Beijing on April 4, 2010.

The request ‘cited the extraordinary adverse market and operating conditions affecting the entire airline industry.

‘As a result of the unprecedented level in the price of fuel and general economic conditions, other carriers in the US-China market have been granted authorization by DOT to defer start-up, suspend service or operate frequencies on a seasonal basis.’

Last year US authorities approved six new flights between the United States and China under an updated civil aviation deal.
Source: AFP

Air China Cargo

Krief Group is tipping China’s Air China Cargo to open an Israel route in mid-2009.

Krief, the Israeli agent for Air China, said there already is 600 tons of air freight a month sent between Israel and China, with an equal share between imports and exports, although most is routed through Europe via various airlines.

Krief said a direct air cargo route would boost trade, especially Israeli exports to China.

Air China is able to overfly Arab countries, which Israel’s El Al cannot do, making a service economical. El Al previously operated a route, but found the costs to be prohibitive.
Source: AirCargo Asia Pacific