Air China profit down 12% to RMB4.06 billion

The airline keen on the stable growth of China economy to continue bringing in opportunities to the aviation industry.

Air China Limited (“Air China”), on Thursday announced its results1 for the six months ended June 30, 2011 (“the Period”).

In the first half of 2011, affected by slow economic recovery in the US and Europe, political turmoil in certain regions and earthquake in Japan, the international aviation market continued to experience a slowdown. High jet fuel prices made the operating environment even more difficult. However, the Group captured the opportunities arising from the stable economic development of China; flexibly adjusted capacity to optimize market distribution; and continued to leverage its core competitiveness. As a result, the Group was able to maintain fair profitability of its core business and achieve satisfactory results.

During the Period, the Group achieved turnover of RMB45.58 billion, an increase of 31.06% over the same period last year.

Passenger revenue was RMB38.53 billion, a year-on-year increase of 34.59%. Cargo revenue climbed to RMB4.97 billion, a year-on-year rise of 11.40%. The revenue growth was mainly due to strong domestic passenger demand and excellent performance of Shenzhen Airlines Company Ltd. (“Shenzhen Airlines”), which became a subsidiary of the Group last year.

Operating expenses climbed by 35.49% to RMB41.57 billion, up from RMB30.68 billion reported in the same period in 2010. Jet fuel cost, which remained the single largest cost for the Group, increased by 53.13% year-on-year and accounted for 39.09% of the operating expenses. The surge in jet fuel cost was mainly due to a year-on-year oil price hike of 27.53%. Compared with the same period last year, the average international jet fuel price rose by 34.01%, while the average domestic jet fuel price increased by 25.64%. Consequently, Air China adopted effective cost saving measures to maintain its cost advantages and further enhance its profitability.

During the Period, the Group recorded a foreign exchange gain of RMB1.51 billion, an increase of RMB1.23 billion, or 440.02% over last year. The gain was largely due to appreciation of Renminbi against the US dollar.

During the Period, the Group recorded an operating profit of RMB4.01 billion, a year-on-year decrease of 2.12%. Profit attributable to shareholders was RMB4.06 billion, a decrease of 12.08% compared with RMB4.61 billion for the same period last year, according to an Air China report.

Mr. Kong Dong, Chairman of Air China said, “Risks and uncertainties will still exist in the global economy in the second half of the year. The pace of economic recovery in Europe and the US will place greater pressure on demand rebound of the international aviation market. Fluctuation in oil prices, however, remains the main factor affecting the results of airlines worldwide. Furthermore, the operating environment will become more complicated in light of intensifying competition among domestic airlines, the inadequacy of support resources and the impact from high-speed railways I some of our markets.

“However, stable growth of China economy will continue to bring opportunities to the aviation industry. The Twelfth Five Year industrial development plan has outlined promising prospects for Chinese civil aviation industry. We will continue to uphold our strategies on prudent operation and sustainable development, improve service quality, consolidate and enhance our core competitiveness and strengthen cooperation with Cathay Pacific Airways, our strategic partner, so as to realize stable and healthy development.”