Transportation Industry

Company Watch - Air China

AirGuide Business, July 21, 2008

7/21/2008

Air China and China Eastern Airlines carried fewer passengers in June than a year earlier as heightened airport security checks ahead of the Olympic Games and a devastating earthquake discouraged air travel. The decline in traffic at two of China's three major airlines extended a drop in May linked to the earthquake in southwest China, which curbed tourist travel to scenic Sichuan province and led to the cancellation of conferences and other events. 7/16/2008

Air China and China Eastern Airlines declining volume has compounded headaches from higher fuel prices, which boosted operating costs, and marks a rare reversal for an industry that has been buoyed in recent years by China's strong economic growth. For the first half of the year, Air China carried 16.56 million passengers, down 0.8 percent year-on-year, while China Eastern's passenger volume slipped 1.23 percent to 18.11 million, the airlines said in separate statements. 7/16/2008

Air China reported a 4.9 percent slip in cargo volume in June to 74,509 tonnes, while China Eastern's freight volume fell 5.9 percent to 69,400 tonnes. Air cargo demand has boomed in China, fueled in part by flourishing overseas trade, although export growth slowed substantially in June due to global economic weakness and the appreciation of China's yuan. 7/16/2008

Air China, the country's flag carrier, flew 2.67 million passengers in June, down 7.5 percent year-on-year, with volume on international routes down 15.5 percent while domestic traffic fell 5.3 percent. China Eastern's passenger volume fell 11.6 percent to 2.75 million in June, with international service down 24.6 percent and domestic service shrinking 9.7 percent. 7/16/2008

Air China Board Secretary Huang Bin acknowledged Air Macau's request for help and said Air China will determine a solution with other Air Macau stakeholders, including TAP Portugal's SEAP investment fund (15%), casino company Sociedade de Turismo e Diversoes de Macau (14%), the Macau government and EVA Air. Air China holds a 51% stake. In a company statement cited yesterday by the Macau Daily News, Air Macau said it has reached a strategic cooperation agreement with Air China and that aid will be extended soon. 7/15/2008

Air China said Wednesday it plans to buy 45 Boeing aircraft in one of China's biggest airliner purchases. The order will include 15 Boeing 777 and 30 Boeing 737 aircraft, Beijing-based Air China said on its Web site. It said the list price for the aircraft is $6.3-billion but the final price paid would be lower than that. Air China said the purchase would increase its fleet capacity by about 35 per cent and help to reinforce Beijing's status as a transportation hub. A Boeing spokeswoman in Beijing, Dai Ni, said she could not confirm that Air China and Boeing had agreed to a sale. 7/16/2008

Air China has cast an eye on the possible sale of a stake in loss-making carrier Austrian Airlines by the Austrian government, an Austrian magazine reported on Wednesday. Austrian magazine NEWS quoted Air China acting Chairman Kong Dong as saying he would look at a possible Austrian sale. The Austrian government has hired advisers to look at possible buyers for parts or all of its 43 percent stake in Austrian. 7/16/2008

China Southern Airlines said on Thursday it plans to cut operating costs by CNY1.3 billion yuan (USD$190.9 million) this year to cope with rising fuel costs, declining passenger volumes and other burdens. It said fuel prices and other factors were set to boost its 2008 operating expenditure by CNY1.86 billion. It said it would achieve the savings by cutting CNY800 million in planned investment on infrastructure and CNY500 million in other costs. 7/18/2008

China Southern Airlines ordered 20 A320s from Airbus to be powered by GE Aviation CFM56-5B engines and opted for a long-term material services agreement. Deliveries will run from 2009 to 2011. None of the parties released the value of the deal, but engine list prices suggest a tab of at least $240 million. 7/15/2008

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