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Airline industry profitability in China will be under considerable pressure this year

02/11/2008| 7:50:00 PM| 中文

Published: 08 Feb 2008:None of China's airlines, with the exception of Air China, are expected to make profits on international routes this year.

Published: 08 Feb 2008:None of China´s airlines, with the exception of Air China, are expected to make profits on international routes this year.

According to Centre for Asia Pacific Aviation (CAPA), overall airline industry profitability in China will be under considerable pressure this year from intense competition and higher fuel prices.

Otherwise, incomes and travel are certainly rising in China, with a 10.8% GDP expansion stimulating a 16% rise in air passenger numbers last year, to 185 million. Meanwhile, the Civil Aviation Administration of China (CAAC) is also expecting a slowdown in passenger growth to around 14% this year, to 210 million. Investment will continue to pour into the sector, with the CAAC expecting capital assets investment for the whole industry to increase in 2008 to US$5 billion, led by investment in airline fleets and airport upgrades.

International passenger traffic, which expanded by 18.6% last year to 16.8 million, should outperform the domestic market again this year, stimulated by the Aug-08 Beijing Olympic Games.

"But the key focus for the industry in this Year of the Rat (associated with material prosperity) surrounds the consolidation of the airline sector. With China Eastern Airlines openly hostile about the prospect of an alliance with Air China, the issue remains wide open," stated CAPA. "Singapore Airlines, with its lazy US$3 billion cash pile (SIA Group, as at 31-Dec-07), will undoubtedly be back with another bid soon, to re-ignite the currently stalled ´Battle for Shanghai´ (ie control of China Eastern Airlines). Global equity market weakness could help deflate Chinese airline stock prices in the meantime, giving a second SIA bid a better chance of success."
TAGS: Centre for Asia Pacific Aviation | China Eastern Airlines | Singapore Airlines
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