Air China, China Eastern profit up despite fuel-cost surge

Shanghai: Flag carrier Air China and Shanghai-based China Eastern Airlines both posted solid profit growth in 2017 as increasing travel demand by the country's growing middle class helped to offset sharply higher fuel costs.

Air China earned 7.24 billion yuan (USD 1.15 billion) for the full year, up 6.3 per cent, while China Eastern took in 6.34 billion yuan, a gain of 4.1 per cent over 2016, the carriers said in statements to the Hong Kong stock exchange where they are listed. Air China's passenger revenue climbed 6.2 per cent while China Eastern saw a 9.6 per cent expansion.

"China's civil aviation is experiencing a period in which ample opportunities are available and rapid growth can be achieved," China Eastern said in its statement late yesterday, citing "the continuous growth of disposable income" in the country.

Profit might have been higher if not for a hike in fuel costs, which grew by nearly 30 per cent in 2017 for both airlines as global oil prices firmed. China Southern Airlines, Asia's largest carrier, had reported a 2017 net profit gain of 18 per cent earlier in the week, citing an increased focus on profitable domestic routes and a stronger Chinese currency.

Airlines also were aided by a stronger yuan, which rose more than six per cent against the greenback in 2017. A stronger currency makes it less expensive for airlines to repay dollar-denominated debt incurred via aircraft purchases and other costs.

China is now the world's second-largest aviation market and increasing demand for air travel among the middle class is expected to push it past the United States as the world's biggest in coming years. Hong Kong's stock market was closed today. Air China's Shanghai-listed shares gained 4.13 per cent, while China Eastern's rose 0.98 per cent.