China’s three major airlines have benefited from the drop in fuel prices and soaring demand to see 21-fold increase in net profits for the first half of the year, and the entire Chinese aviation industry has made more profit in the first half of this year than the whole of 2014.
low fuel prices boosted carrier profits in 2015
Air China recorded the highest net profit among the three top Chinese airlines in the first half of 2015, with estimated net profit attributable to shareholders of listed company at around RMB3.8 billion to RMB4 billion, up 701%-743% y-o-y.
China Eastern Airlines had the highest growth of net profit, at an estimate of 249 times, to about RMB3.5 billion to RMB3.7 billion this year from RMB14 million in the same period last year.
China Southern Airlines estimates net profit of RMB3.4billion to RMB3.6 billion in the first half of the year, compared with a loss of RMB1.018 billion in the same period last year.
As fuel is the biggest cost for airlines, the dramatic drop in fuel prices is the main reason for the remarkable rise in the three carriers’ profits. China Eastern’s fuel expenses made up 37.97% of its total annual costs, according to its 2014 annual report. The average price of jet fuel in the first half of 2015 was US$59.4 a barrel, down by 45.5%, and China Southern saved roughly RMB6.5 billion on fuel costs in that period.
Another major reason for the carriers’ higher profits is the enormous potential of China’s aviation market, which has turned over 40.51 billion ton-kilometers in freight as of the end of June, up by 14.5% y-o-y, and 210 million trips in passenger throughput, up by 12.5% y-o-y.
The demand for international air services in China has been growing especially fast with international air route passenger and freight throughput increased by 39.40% and 27.50% respectively, compared to 10.50% and 11.70% respectively for domestic air services.(Translation by David)
