Airlines see profits decline sharply

Three State-owned airlines have released their fiscal reports for 2012, all witnessing sharp profit declines, as analysts said Wednesday that it is difficult to imagine a big recovery this year.

China Southern Airlines Co, the largest Chinese airline in terms of fleet size, Tuesday reported a 48.2 percent drop to 2.62 billion yuan ($421.48 million) in 2012 net profit, the biggest change among its domestic peers, followed by Air China, the country's flagship carrier, with a 33.8 percent drop to 4.95 billion yuan, and a 29.8 percent drop for China Eastern.

Earlier this month, Hainan Airlines reported a profit decline of 26.7 percent in 2012.

Both China Southern and Air China attributed their losses to weak demand and rising aviation fuel costs, as well as to intensified industry competition and a slowdown in the growth rate of the yuan against the US dollar.

"Oversupplied transport capacity is a big reason for the loss," Lin Zhijie, an independent aviation watcher, told the Global Times Wednesday, noting that the industry's oversupply will continue in 2013, which will cast a shadow over this year's profits.

A report released by UBS Securities Wednesday referenced China Southern as an example, saying jet fuel costs had gone up by 14.5 percent, while the operation of four A380 aircraft may have caused a revenue decline of 200 million yuan in 2012.

"Airline performance will not see a big recovery in 2013," noted Lin, citing figures from the Civil Aviation Administration of China that put the overall profitability of domestic aviation enterprises in the first two months at around 200 million yuan, compared with a profit of 3 billion yuan in the same period last year.

Sun Chao, an analyst from Pingan Securities, Wednesday told the Global Times that more travelers are expected in 2013, but ticket prices are still low, preventing the carriers from seeing a big profit jump.

Ma Xulun, general manager of China Eastern, was quoted in the China Business News Wednesday as saying that the expanding high-speed railway network also hampers airline performance.

China Southern predicted in its fiscal report that global demand will maintain a modest growth in 2013, but domestic demand will recover slowly due to government measures.