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

Shanghai Airlines crew

Shanghai Airlines flew into the black in the first half of this year on rising traffic and a government subsidy.

Its net income was RMB23.41 million ($3.41 million), or RMB0.022 a share, in the six months against a loss of RMB134.51 million a year earlier. Its revenue grew 26% to RMB7.03 billion.

It attributed the growth to booming traffic during the period. The Shanghai-based carrier flew 4.88 million passengers in the first half, a rise of 14.07% from a year earlier, and it carried 8.9% more cargo at 1.66 million tons.

Tao Wei, an analyst with China International Capital, said, ‘The carrier’s profit is better than our expectations in the first half, but its load factor on international routes was only 60%, much lower than the average.’

The carrier also started flying on eight new routes in the first six months, including chartered flights from Shanghai Pudong International Airport to Songshan Airport in Taiwan.
Source: China View

China Southern Airlines

Liu Shaoyong, the chairman of China Southern Airlines said the outlook for the carrier is bleak, following a difficult first half of 2008.

He said that airlines are ‘generally saddled with three major burdens, including insufficient market demand, fierce competition and high oil prices. . . . As such, the group expects to undergo a long period of hardship.’

This year China Southern’s shares have fallen 81% making it the worst performing company in the Shanghai CSI 300 Index.

Luckily, the renminbi appreciated against the US dollar in the first half of 2008 by 6.6% — delivering the carrier a $384 million foreign currency gain.
Source: eTravel Blackboard

Air cargo Shanghai

China’s air cargo market will continue to grow despite a recent slowdown in exports as the US economy contracts.

Speaking at a recent air cargo forum in Shanghai, air cargo company executives said China’s market was moving towards a more balanced trade, maturing with quality services and eco-friendly efficiency.

Alexander Kopkov, air cargo manager of ATC International Freight and Forwarding (Shanghai), noted that China did not only lead the region in the international air market, but that its development and global integration was boosting the economies of neighboring partners such as Russia.

Air transport volume between China and Russia, which has been increasing over the past few years, was the deciding factor in ensuring Russia’s air cargo market maintained a two-digit growth over the next decade and a half, Kopkov said.

Sebastian Chan, vice-president of supply chain operations at UPS China, agreed, noting that the domestic market was taking on increasing importance, as seen by the high numbers of imports and the investment in domestic transportation in China. More on this HERE.
Source: CargoNews Asia

Beijing airport security

Beijing Capital International Airport is seeing record flights and passenger numbers during this Olympic month.

However, before anybody dances in the streets from this new record activity, BCIA needs to come to terms with the sharp decline in airport business during the first half year operation in 2008.

On July 31, ten days before the Olympics, BCIA issued a profit warning for its 2008 interim results on falling demand and rising costs.

Net profits for the six months of 2008, may fall significantly from the RMB567 million ($83.4 million) in the first half of 2007.

From August 2007 to March 2008, out of security concern for the Olympic Games, CAAC imposed limitation on flight throughput of the airport, from
1,100 flights per day to 1,000 flights, resulting in a less than expected passenger volume.

Meanwhile, the introduction of the Third Terminal drove operating costs upward.

For the second half of 2008 better performance is projected compared to the
same period last year as the limitations on flight throughput are lifted.
Source: Air Cargo News

Air China and China Eastern Airlines carried fewer passengers in June than a year earlier. The decline in traffic at two of China’s three major airlines extended a drop in May.

Air China, the country’s flag carrier, flew 2.67 million passengers in June, down 7.5% year-on-year.
Volume on international routes down 15.5% while domestic traffic fell 5.3%.
Air China reported a 4.9% slip in cargo volume in June to 74,509 tonnes
China Eastern’s passenger volume fell 11.6% to 2.75 million in June.
China Eastern’s freight volume fell 5.9% to 69,400 tonnes.
International service was down 24.6% and domestic service 9.7%.

The declining volume has compounded headaches from higher fuel prices, which boosted operating costs, and marks a rare reversal for an industry that has been buoyed in recent years by China’s strong economic growth.

China Southern Airlines, China’s largest carrier by fleet size, and Shanghai Airlines have yet to release June figures. Both also reported a slip in passenger numbers in May.

Chinese airlines have also raised domestic jet fuel surcharges as much as 50% to offset pressure from high oil prices and further increases are possible.
Source: Reuters