Higher fuel costs pressure Chinese airline profits in the first half

SHANGHAI: Asia’s biggest carrier China Southern Airlines said higher jet fuel costs clipped its profit in the first half, while China Eastern earnings rose but only with the help of a one-off asset sale.

Net profit at state-owned China Southern dropped 11.1 per cent year-on-year to 2.77 billion yuan (US$420 million) in January-June, the carrier said late Tuesday in a statement to the Hong Kong stock exchange, where it is listed.

Its bottom line was hit by a more than 30 per cent rise in operating expenses due to higher jet fuel costs, which offset revenue gains, the Guangzhou-based airline said.

Chinese carriers have benefitted from a boom in domestic and international air trips as China’s middle class spends more on travel and leisure.

China Southern said its total operating revenue increased 11.7 per cent in the first half, to 57.82 billion yuan.

China Southern’s shares jumped 4.74 per cent in Hong Kong Wednesday and were 5.81 per cent higher in Shanghai, where the company also is listed.

China Eastern said in an exchange statement that its net profit for the first half jumped 34.4 per cent to 4.34 billion yuan, but that was due to 1.9 billion yuan earned through the sale of a logistics subsidiary.

The Shanghai-based carrier’s jet fuel expenses surged 45 per cent.

“The international crude oil prices have increased significantly from a lower comparison base in the same period last year,” China Eastern said, adding that intensifying industry competition resulted in a drop in revenue from its international routes. — AFP