Air China first quarter profit down 23% to HK$1.99bn

The carrier implements corporate growth strategy, such as increasing synergies with Cathay Pacific and Shenzhen Airlines, to tackle market challenges.

Air China Limited (“Air China”) on Thursday announced its results1 for the three months ended 31 March 2011 (“the Period”).

In the first quarter of this year, benefiting from the gradual recovery of Chinese economy, the domestic airline industry maintained its growth momentum carried over from last year. However, the impact of the unstable political condition in North Africa, the earthquake in Japan and fluctuations in oil price have slowed down the growth of international traffic and cargo business, according to an Air China report.

Facing such market challenges, the Company managed to record a good performance by implementing its growth strategies. During the Period, the Group's operating revenue was RMB21.25 billion, representing an increase of 44.6% year-on-year. Operating profit decreased by 11.5% compared with the same period in 2010 to RMB2.25 billion. Net profit reached RMB1.67 billion, representing a drop of 23% compared with a net profit of RMB2.17 billion in the first quarter 2010.

During the Period, passenger capacity, measured by Available Seat Kilometer (“ASK”), rose by 36.7% year-over-year to 36.35 billion. Passenger traffic measured by Revenue Passenger Kilometers (“RPK”) was 28.83 billion, up 37.9% from the first quarter of 2010. Passenger traffic or RPK on international, domestic and regional routes increased by 7.0%, 60.2% and 10.1% year-on-year to 8.33 billion, 19.36 billion and 1.14 billion respectively. The passenger load factor was 79.3%, an increase of 0.7 percentage point compared with the same period in 2010. The load factor for domestic routes was 81.5%, up 4.5 percentage points year-over-year; while those for international and regional routes were 75.8% and 71% respectively, representing a decrease of 6.2 and 2.8 percentage points year-over year.

During the Period, cargo capacity, measured by Available Freight Tonne Kilometers (“AFTK”), increased by 10.7% year-on-year to 1.99 billion. Cargo traffic, measured by Revenue Freight Tonne Kilometers (“RFTK”), rose by 9.6% to 1.13 billion. The cargo and mail load factor was 57.1%, a decline of 0.6 percentage point year-on-year.

Outlook
Mr. Kong Dong, Chairman of Air China said, “Our overall operations sustained steady growth in the first quarter of this year albeit affected by the global political volatility, the earthquake disaster and other factors. Seizing the opportunities from the continuous recovery of the global aviation industry, stable macroeconomic growth in China and the increasing synergies with Cathay Pacific and Shenzhen Airlines, we expect to see greater room for growth this year. Taking into account the uncertainties such as sudden unexpected incidents, jet fuel price hikes, greater competition from high-speed railways and exchange rate fluctuations, we remain optimistic about the overall market this year yet will be prudent about our approach to business”.