Two of China’s major airlines saw a drop in first-half net profits as they face slower economic growth which has cut domestic demand, as well as competition from high-speed rail.
China Southern Airlines’ net profit fell 19 percent in the first six months to 344 million yuan (US$55.8 million), down from 424 million yuan a year ago.
The Guangzhou-based airline, which boasts the largest domestic market share of the three big state-owned carriers, also cited fierce competition from the expanding domestic high speed railways.
China Eastern Airlines, the country’s second biggest carrier by passengers, saw its half-year net profit fall 23 percent on weaker domestic air travel demand.
The net profit of the Shanghai-based carrier was 763.30 million yuan, down from 995.1 million yuan in the same period last year. Revenue rose 2.7 percent to 41.48 billion yuan, according to its interim report.
However, Hainan Airlines, the nation’s fourth-largest carrier, turned in robust profit. Its net profit in the first half soared 29.28 percent to 645 million yuan. Revenue gained 3.83 percent to 14.4 billion yuan.
The airline attributed the growth to an increase in its fleet to 120 planes from 109 and rising passenger traffic. It carried 12.46 million passengers, or up 13.38 percent, from January to June.
Air China, the country’s flag carrier, saw first half earnings rise 7.3 percent to to 1.12 billion yuan, from the 944.5 million yuan net profit a year earlier.
The airline gained from a rapid expansion in its international network that now provides 40 percent of its revenue, it said. In the last three years, Air China has launched at least 18 international routes, lifting its overseas flights by over 20 percent.
With the domestic market weakened, China Eastern and China Southern are growing international routes, which generate 30 percent and 19 percent of their sales outside of China.
“Airlines had to cut domestic fares aggressively to compete for passengers,” said Yu Nan, analyst with Haitong Securities in Shanghai. “Pricing on international routes has held up better than domestic routes.’’