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China Eastern returns to black in first half

By Wang Ying (China Daily)
Updated: 2009-08-12 09:58

China Eastern, one of China's top three carriers, saw a revenue of 17.5 billion yuan in the first six months. [Agencies]

The two Shanghai-based carriers that are currently proceeding toward a merger have come out with contrasting earnings numbers for the first half. China Eastern Airlines successfully turned its balance sheet black by making a profit of 1.174 billion yuan ($171.89 million), while Shanghai Airlines continued to bleed.

China Eastern, one of China's top three carriers, said it posted an interim profit of 1.173 billion yuan.

Shanghai Airlines, however, extended its losses and reported a wider net loss of 91.29 million yuan during the period.

"Due to the weak demand in the first half, both China Eastern and Shanghai Airlines made losses in their core business, of 545 million yuan and 20.98 million yuan," said Ji Lijun, analyst, Shanghai Securities.

China Eastern's revenue in the first six months was 17.5 billion yuan, a drop of 15.83 percent over 2008. Shanghai Airlines saw its total income fall 22.52 percent year-on-year to 5.44 billion yuan during the same period.

"Price war among major carriers has eroded profitability and it is a paradoxical situation. Though passenger numbers have gone up, profit remains unchanged," said Yao Jun, analyst, China Merchants Securities.

The current year is expected to be one of the most turbulent one for the aviation industry due to the global economic recession, China Eastern said.

According to figures from the International Air Transport Association (IATA), global passenger numbers declined 7.2 percent in June compared to the same month last year, while freight demand fell 16.5 percent.

Related readings:  China Eastern to merge with Shanghai Airlines  Yunnan buries the hatchet with China Eastern  China Eastern wants to gain more market share in Beijing  7b-yuan injection into China Eastern given greenlight

China Eastern's mid-year report showed domestic airline income going up by 3.54 percent in the first six months, while outbound flights saw a decline of 47.61 percent. Shanghai Airlines saw its domestic route income falling by 9.38 percent, and international by 45.5 percent.

Taking stock of the situation, China Eastern has rearranged its international and regional flights and decided to put more focus on the domestic market. In addition, the carrier has also slashed operational costs and other spending to achieve profits. "Such policies were well-received," said the Shanghai-listed carrier.

China Eastern's expansion plan, however, remains unchanged. The carrier said it would continue its merger and strengthen collaboration with Shanghai Airlines.