Air China To Lift Capacity On Signs Of Improvement

Air China on Tuesday said it will continue to increase capacity in 2009 and has seen signs of improvement in its passenger and cargo businesses.

The airline would expand its fleet in a constrained manner by taking delivery of 27 aircraft this year and returning eight to 10 leased aircraft, Chairman Kong Dong told reporters.

Analysts said Air China and its two main rivals, China Eastern Airlines and China Southern Airlines, may return to profit this year as domestic air travel rebounded in the first quarter and said the trend could extend through the year.

The global financial crisis, which depressed air traffic, and huge fuel-hedging losses saw the three Chinese carriers' earnings fall deep into the red in 2008, with Air China reporting a loss for the year of CNY9.3 billion yuan.

Air China reversed losses by reporting a net profit of CNY981 million (USD$143.6 million) in the first quarter of 2009, including an exceptional gain and helped by lower fuel costs.

"Demand improved in the first quarter and we have seen positive signs on both the cargo and passenger fronts, especially in the domestic market," said Chief Financial Officer Fan Cheng.

However, the airline plans to cut capital spending by up to 30 percent to between CNY9 billion and CNY10 billion this year from CNY12.9 billion in 2008.

Airlines around the world are taking cost-cutting measures to weather a drop in business resulting from the global economic downturn.

Cathay Pacific, which is 17.5 percent owned by Air China, has delayed aircraft deliveries this year and has asked staff to take unpaid leave after it reported a 22.4 percent drop in revenue from passenger and cargo services in the first quarter.

Air China's first-quarter results included a loss from its associate, Cathay Pacific, Fan said.

Shares of Air China have jumped 46 percent this year, outperforming a 14.5 percent rise on the index for major Chinese companies listed in Hong Kong.