The Centre for Asia Pacific Aviation has a report on the SWOT situation in airlines in China. (SWOT, so beloved of analysts, is Strengths, Weaknesses, Opportunities, and Threats which works well if used appropriately as in this case. Often used inappropriately when it is used to dazzle mug punters.)
This report suggests that China’s airline industry faces an enormously challenging year. It is drawn from The Centre’s monthly Essential China publication.
On the surface it would seem the airlines are stemming the flow of red ink. Various measures of Government support helped China’s airlines report profit at the net level in the first quarter, but this is not a true reflection of the state of the sector’s financial health.
When compared to the combined $450 million operating profit in the corresponding period last year, China’s state-owned carriers have suffered a $650 million turnaround at the operating level.
The report states, flatly: The proposed China Eastern Airlines-Shanghai Airlines merger would combine two loss-making and structurally flawed carriers. Their respective backers (the central and Shanghai Municipal governments) are attempting to stem the flow of red ink at both carriers, but risk creating a loss-making behemoth.
The report from the Centre for Pacific Aviation is long, fairly depressing and possibly accurate. It does say, in a more postivie vein that: ‘Overall, the CAAC’s traffic forecast for 2009 could be achievable, if only because the 2008 growth rate was so sluggish.’ Then it ends on a down note: the Chinese airline industry as a whole will not report a profit again in 2009.