Aviation industry set to take off
Updated: 2007-08-10 15:07
It has reduced the cost of purchasing and leasing aircraft and aviation equipment as these transactions are settled in US dollars. Chinese airlines' maintenance and landing fees at foreign airports are also lower because of the appreciation.
The stronger renminbi gave China Southern Airlines an exchange gain of about 1 billion yuan in the first half, with Air China reaping more than 800 million yuan and China Eastern Airlines getting about 700 million yuan, Ma said.
The renminbi is widely expected to pick up speed in the second half of this year.
The biggest risk to Chinese airlines is the price of aviation oil, said Li Lei, an aviation analyst at CITIC Securities.
"But we shouldn't exaggerate the negative impact of oil price rises," said Ma, adding that Chinese airlines are using jet fuel forward contracts to hedge costs and higher fuel surcharges are often levied on consumers when oil prices rise.
Domestic jet fuel prices were lowered four times, an accumulated drop of 360 yuan per ton, during the first half of this year. If jet fuel prices drop 100 yuan per ton, Air China would gain extra profit of 204 million yuan, while China Southern's profit would increase 266 million yuan, according to figures from CITIC Securities.
Major Chinese carriers will soon issue their interim reports.
Air China, the nation's flagship carrier, last month forecast its first-half net profit would increase 20 times due to strong market demand and appreciation of the renminbi, which could take its net profit past 900 million yuan. Air China was the only profitable company of China's three largest aviation groups in the first half last year, with a net profit of 45 million yuan.
Guangzhou-based China Southern and Shanghai-based China Eastern both forecast they would get back in the black in the first six months of the year. China Southern reported a loss of 835 million yuan during the same period of last year, while China Eastern suffered a huge loss of 1.4 billion yuan.
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