Growth in overseas leisure travel has helped boost core earnings at China's biggest airlines in the first quarter, and signaled that the nation's recent slowdown hasn't weighed on consumer sentiment as much as some may have feared.
Chinese airlines carried 13% more passengers in the first three months of 2014 from a year earlier, though they saw demand being particularly strong to points outside mainland China. At flag carrier Air China Ltd., international passenger revenue rose 19% during the period, slightly below the 22% jump at rival China Southern Airlines Co.
An increasingly congested home market has prompted the nation's state carriers to expand their overseas reach, launching new long-haul routes from smaller cities such as Changsha and Chengdu to destinations in Europe and North America.
But the move also mirrors the consistent growth in the number of Chinese leisure travelers seeking to go abroad, despite China's economic expansion slowing to 7.4% in the first quarter, its lowest level in 18 months as the world's second-largest economy continued to downshift.
'Slower economic growth won't have immediate impact on leisure air traffic unless there are one-off factors such as a major economic crisis or natural disasters that significantly disrupt air travel sentiment,' said Kelvin Lau, a transport analyst at Daiwa Securities, noting he expects demand for leisure travel to remain resilient.
During the first quarter, the number of Chinese air passengers traveling abroad rose 17% from a year earlier, according to the nation's aviation regulator, reaching 7.1 million people and accounted for nearly 8% of all airline passengers.
Nonetheless, net earnings figures released this week showed that China's 'Big Three' state carriers reported significantly weaker first-quarter results because of a weaker national currency, which fell 2.7% during the period against the U.S. dollar.
The Big Three--Air China, China Southern, and China Eastern Airlines Corp.--have as much as 80% of their net debt denominated in U.S. dollars to finance aircraft leases and purchases, and any fluctuations in the yuan would have a major impact on their bottom lines. The weaker yuan has also hurt corporate profits among other Chinese industries, such as oil refiners, because crude oil is denominated in U.S. dollars.
Air China on Tuesday said its first-quarter net profit plummeted 63% to 92.7 million yuan ($15 million), compared with 249 million yuan in the year-earlier period. Meanwhile, China Southern and China Eastern posted a combined net loss of 511 million yuan during the period.
Yet these foreign-exchange losses are mostly noncash, as companies are required under accounting rules to value their substantial foreign-currency debts at the end of every quarter.
Consequently, they don't pose significant medium-term impact if the yuan's declines stabilizes near current levels, say analysts.
The weak net results therefore mask the robust earnings pickup in the nation's airline industry for the quarter. All the Big Three carriers would have been profitable on an operating level if the currency impact was excluded.
At China Southern, for example, operating profit saw a near fivefold increase to 1.07 billion yuan, from 188 million yuan in the same period last year, according to Barclays Capital estimates. With the currency impact, the airline swung to a net loss. Similarly, at Air China, first-quarter operating profit increased by 515 million yuan excluding the foreign exchange items.
The overseas expansion drive by the Chinese airlines is helping improve utilization of the many widebody aircraft the carriers have ordered over recent years. Most aircraft orders by the state airlines are done through a centralized procurement agency by the government, and in the past have led to mismatches between capacity and demand.
However, analysts say they expect some of the new international routes to remain unprofitable in the near term or manage to break even at best.
The Chinese airlines are 'going into this faster growing segment to broaden their earnings stream, but in the medium term these new businesses won't necessarily be very profitable to them because of the startup costs attached with the network expansion,' said Andrew Orchard, an aviation analyst at CIMB Securities
The outlook for the Big Three carriers will also be overshadowed by the government's recent efforts to liberalize the nation's skies. The government earlier this year unveiled long-awaited guidelines to jump-start the nation's fledgling budget-airline market, including pledges of financial support, plans to simplify approvals for new low-cost airlines, as well as measures to help existing budget carriers expand their fleets more quickly.
Mr. Orchard said he estimates nonstate airlines, including budget carriers, account for around a quarter of seat capacity on routes that they compete head-to-head with state carriers. He expects these private airlines to play an even bigger role in the domestic travel market going forward.
'The history of low-cost carriers is that they've been price eroding so it's logical to assume that there'll be some ticket price impact,' he said.
中国航空业第一季度客运量同比增长13%，不过航空公司发现乘客们飞往中国大陆以外目的地的需求尤为强劲。中国国际航空股份有限公司(Air China Ltd., 简称：中国国航)第一季度国际客运收入增长19%，略低于竞争对手中国南方航空股份有限公司(China Southern Airlines Co., 简称:南方航空) 22%的增幅。
大和证券(Daiwa Securities)运输业分析师刘健恒(Kelvin Lau)称，经济增速放缓不会立即冲击休闲旅游航空客运量，除非出现重大经济危机、自然灾害等严重干扰消费者对航空旅行热情的一次性负面因素。他预计休闲旅游需求将保持坚挺。
三大国有航空公司分别是中国国际航空股份有限公司(Air China Ltd. ,0753.HK, 简称:中国国航)、中国南方航空股份有限公司(China Southern Airlines Co. ,1055.HK, 简称:南方航空)和中国东方航空股份有限公司(China Eastern Airlines Co. ,600115.SH, 简称:东方航空)。三家公司高达80%的 债务是美元债务，主要是为租赁和购买飞机提供资金，人民币汇率的任何波动都会对它们的利润构成重大影响。人民币走软也冲击了中国其他行业公司的利润，如炼油企业，因原油以美元计价。
中国国航周二表示，该公司第一季度 利润由上年同期的人民币2.49亿元大幅下滑63%，至人民币9,270万元（合1,500万美元）。与此同时，南方航空和东方航空在第一季度 亏损总额达到人民币5.11亿元。
以南方航空为例，据Barclays Capital估计，该公司第一季度的营业利润由上年同期的人民币1.88亿元增加了近五倍，至人民币10.7亿元。但将汇兑损失考虑在内，南方航空则转为 亏损。同样，剔除汇率因素，中国国航第一季度营业利润增长了人民币5.15亿元。
联昌国际证券(CIMB Securities)航空分析师奥查德(Andrew Orchard)表示，中国航空公司将进入这一增长迅速的领域以拓宽收益渠道，但中期内这些新业务不一定会带来丰厚利润，因为航线网络的扩张需要启动成本。