Profits plunge 80% for Air China

Profits plunge 80% for Air China

Air China has seen its profits drop to 190.3 million renminbi ($30.8 million) in the first half of 2014, despite cargo revenue rising by six per cent to 3.9 billion renminbi.

Profits fell from 1.2 billion renminbi in the first half of 2013, despite total revenue rising from 45.8 billion renminbi in the first six months of 2013 to 49.1 billion in the same period of 2014. The drop in profit was put down to volatile economies globally and weakness of the renminbi against the US dollar.

Cai Jianjiang was appointed as chairman of Air China, in February. He is also president, deputy party secretary of the China National Aviation Holding Company. He says: “The exchange rate volatility of the renminbi against the US dollar was the primary factor that led to the overall decline of our first half results.”

According to Jianjiang, the second half of 2014 will see China’s economy maintain a trend of, “overall stable development”. In his view, the industry’s internal and external competition will remain intense, “while exchange rates and oil prices still remain uncertain”.

The carrier’s available freight tonne kilometres rose by 14.9 per cent to 4.7 billion and the load factor fell by 3.3 percentage points to 53.9 per cent. 

International cargo revenue rose by 5.2 per cent to 2.8 billion renminbi, domestic revenue was up 7.9 per cent to 939.5 million renminbi and Hong Kong, Macau and Taiwan saw the biggest rise of 8.1 per cent to 166.4 million renminbi.

Jet fuel costs increased by five per cent to 17.1 billion renminbi. However, this is not inflation but what Air China says is increased air traffic volumes. The same reason is given for the landing and depot costs rising by 13.3 per cent to five billion renminbi. Aircraft maintenance, repair and overhaul costs rose by 11.6 per cent to 1.7 billion renminbi. 

The airline has introduced new aircraft to its fleet including, Boeing 777 Freighters for high-yield European routes. It has expanded what it calls , “its strategic cooperation,” with China Postal Airlines and is now operating three Boeing 757 Freighters as part of that agreement. In the first half of 2014 it took delivery of 28 new aircraft including Airbus A330s, Airbus A320s and Boeing 777-300 extended range. It retired 13 old aircraft including, Airbus A340s, Boeing 747-400 Combis and Boeing 767s. It says introducing the new aircraft will reduce operating and maintenance costs.

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