China Eastern Airlines returned to profit in the first half of this year thanks to fuel-hedging gains while its smaller rival, Shanghai Airlines, flew into a loss in the period.
Net income of Shanghai-based China Eastern soared to RMB1.17 billion (US$171 million) in the six months from RMB1.3 million a year earlier.
The airline attributed the profit growth to the RMB2.8 billion worth of gains it made in fuel-hedging contracts from January to June, compared with RMB451 million a year ago. But note that revenue declined 16% to RMB17.5 billion.
Li Lei, an analyst at China Securities, said, "The carrier should perform better in operating profit as the domestic aviation market posted a strong recovery in the first half, which indicated that its profitability was still weak because of fierce competition."
Li forecast the domestic aviation market to grow faster in the second half of this year and China Eastern is likely to post a profit for the year.
Meanwhile, Shanghai Airlines, which is in talks with China Eastern about a merger, lost RMB679 million in the first half mainly due to a plunge in cargo volume.
The carrier blamed the loss on the global financial crisis and the H1N1 virus outbreak which cut its passenger income by 9.6% to RMB3.76 billion and cargo income by 55% to RMB498 million.
China Trade Information reported that Shanghai Airlines’ board of directors have approved the merger between China Eastern and Shanghai Airlines but the plan still requires approval from shareholders and regulators. However, it is expected the merger will be completed by the end of this year.
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