• Home
• /
• Aviation

Air China H1 profit plunges 77% on slowing economy

HONG KONG — Air China has become the latest major Chinese company to report a steep drop in first-half profit, as income plunged 77 per cent because of the slowing economy, heightened competition and rising jet fuel costs.

The carrier, one of China’s three-state owned airlines, joins a number of other big Chinese companies, from oil companies to banks, that have been reporting unexpectedly sharp drops in profit.

The dismal reports, which follow a raft of profit warnings earlier this year from the airlines and other companies, add to pressure on Beijing to reverse a painful slump in the world’s second-biggest economy.

Beijing-based Air China said late on Tuesday that net income in the first six months of the year fell to 945 million yuan ($149 million) or 0.08 yuan (1.2 cents) per share. That’s down sharply from 4.3 billion yuan or 0.33 yuan per share in 2011. Revenue climbed four per cent to 45.3 billion yuan.

Along with the global economic slump and higher fuel prices, the company said the aviation industry came under ‘great pressure’ from weakening demand for air travel, escalating costs and intense competition.

“In the second half of the year, we foresee that the operating environment for the global aviation industry will remain both challenging and complex,” Air China said.

The cost of jet fuel, the airline’s single biggest expense, was 10 per cent higher than the year before. Other costs such as wages and catering also rose.

Air China also suffered 339 million yuan in foreign exchange losses because of weakness in the yuan, China’s currency. A year ago, the airline gained 1.5 billion yuan because of the currency’s strength.

China’s economic growth fell to a three-year low of 7.6 per cent in the second quarter and forecasters say the slowdown might have bottomed out but the timing and strength of a rebound are uncertain.

The carrier’s results were similar to those announced the day before by China Southern Airlines, which posted an 85 percent drop in profit. A third major airline, China Eastern, is scheduled to report earnings on Thursday.