Aviation sector to hit turbulence
By Hui Ching-hoo, Zhang Jin and Chen Hong (China Daily)
Updated: 2006-07-27 09:09
As oil prices rise, making money is no longer the name of the game in the
aviation sector; rather the race is to see who can lose the least.
That
could probably be the case for the mainland's three largest carriers, which are
expected to post their first-half results in August.
According to six
Hong Kong-based analysts surveyed by China Daily, China Southern Airlines and
China Eastern Airlines are not likely to go into the black. The median
prediction is that they would post HK$1 billion (US$128 million) and HK$502
million (US$64 million) in losses for the first half of the year. The figures
represent a 3.6 per cent and 6.7 per cent increase year-on-year,
respectively.
The mainland's largest carrier by market value, Air China,
would be the only survivor, with its many international routes helping offset
part of the fuel cost and make profit.
Analysts put its first-half net
profit estimate at HK$630 million, down 2.6 per cent from a year ago.
And one
analyst said Air China would have a "tendency" to fall into the red if it didn't
trim its cost efficiently, although that possibility remained very
slight.
All three trade their shares in Hong Kong.
"With the oil price
hovering at a high level, they have little room to manoeuvre," said an aviation
analyst at Hong Kong's Tai Fook Securities, who spoke on condition of
anonymity.
International oil prices experienced two major hikes in the
first half of the year and reached a peak of US$78 a barrel this
month.
Oil accounts for one-third of airlines' total operating costs, and
mainland airlines find it difficult to pass the cost on to passengers due to
fierce competition.
(For more biz stories, please visit Industry Updates)
|
