Despite the fact that one Chinese airline after another has forecast a fi rst-half profi t, signifi cant operational challenges still face the industry asit continues to grow, ATW Online reported.
Last month, China Southern Airlines said it expected to reverse a CNY835 million ($110.2 million) loss in the fi rst half of 2006, while Air China forecasted net earnings more than 20 times greater than the CNY45.8 millionposted in the year-ago semester.
China Eastern Airlines expected to return to profi t following last year’s CNY40 million loss and Hainan Airlines revealed that it expects earnings to increase by 750 percent year-over-yearfrom CNY20.8 million.
“Although Chinese airlines’ load factor and aircraft utilisation rate improved in the fi rst half, it didn’t necessarily mean China’s airlines removed the root causes for their previous losses,” Hainan Airlines board secretary Jade Cargo has expanded network with Frankfurt service. Zhang Shanghui said. “The rising fuel price is still a major haunting problem.” East Star Airlines spokesperson Wang Yankun also noted that the threat of rising domestic fuel prices is the most signifi cant bit of uncertainty facing airline management as international prices continue to rise.
Spring Airlines spokesperson Zhang Lei warned: “If we can’t maintain effective cost control, it will be diffi cult to earn a profi t.” Civil Aviation University of China President Wu Tongshui pointed out that oil price is not theonly thorny issue.
“Generally speaking, Chinese airlines’ operating costs and liability rate are still very high,” he said. “Their unbalanced networks also caused big problems, as an unreasonable proportion of trunk routes to regional routes, as well as domestic routes to international routes, led to a huge loss of high-end passengers.”
Local industry analysts have pointed out that route development trends generally are incompatible with aircraft types and airport infrastructure, which results in wasted resources and low effi ciency.
In addition, Chinese network carriers remain in an inferior position when competing with foreign counterparts on international routes, which is attributable mainly to a shortage of hub-and-spoke systems.
