Rising wages in China have stoked domestic travel demand and IATA expects this to continue over the next five years. As a result of this growth environment, profits in China Southern Airlines rose nearly 18-fold last year. Net income was 5.8 billion yuan ($883 million) in 2010 up from 330 million yuan in the previous year – far surpassing analysts’ expectations of 5.7 billion yuan. Sales grew 40% to 76.5 billion yuan as passenger numbers rose 15%.
China Southern profits are expected to fall despite benefiting from the yuan’s 3.4% appreciation against the dollar last year as the airline books revenue in yuan while debt is in dollars – mostly for aircraft purchases. Analysts are predicting the airline’s profits will fall to 4.5 billion yuan owing to high fuel costs. Shares in the carrier fell on the news.
However, Air China and China Eastern Airlines are expected to post increase profits late in the week.
However, Air China and China Eastern Airlines are expected to post increase profits late in the week. The yuan’s appreciation against the Dollar is at the top of the priority list for the US Government, as the US economy pulls out of the doldrums, so it will be able to put pressure on China and in turn the profits for the big national carriers there will fall as debt becomes more expensive. The status quo cannot last.
Meanwhile……………..EU old news is new news – Prepare for taxation
The European Commission yesterday said it is committed to the complete modernization of Europe’s air traffic control system by 2020, delivering a single European sky and the completion of the European Common Aviation Area of 58 countries by 2020 under the Transport 2050 white paper, a plan for a more competitive and efficient transport system in Europe while reducing carbon dioxide emissions from the transportation sector by 60% before 2050.
Most of you reading this that have been in aviation for over a decade will remember that a single European sky has been talked about for all that time. It has taken the EU ten years to realize that if you want to cut emissions and save fuel then a single European sky with controlled decent is the key. Airlines have been batting on about this since the 1980s. Now though we hear from an MEP that the EU will want someone else to collect the colossal bill for getting this program off of the ground – Airline taxation of some sort is therefore on the way for all airlines entering EU airspace. You will recall though that the ETS is supposed to pay for this. If an announcement is made that does not confirm the ETS as being the driver for single ATC then something is seriously amiss.