'Big Three' airlines say profits plunge in H1

BEIJING -- China's three major airlines have all reported more than a 50 percent drop in the profit forecast in the first six months this year but earnings are expected to recover in the second half of the year, market analysts said Thursday.

Air China, the country's flagship carrier, on Wednesday said it predicted the first-half profits to have fallen more than 50 percent from a year earlier. In the first half of 2011, Air China reported a net profit of 4.063 billion yuan ($645 million).

The company blamed weak travel demand, high fuel prices, and fluctuation in foreign exchanges for the loss.

A China Southern Airlines plane lands at the Shanghai Hongqiao International Airport on July 7. [Photo/Asianewsphoto]

Earlier this month, both China Eastern Airlines and China Southern Airlines - two other major Chinese carriers - estimated their first-half profits to decline more than 50 percent.

Shanghai-based China Eastern Airlines reaped net profit of 2.45 billion yuan in the first half of 2011.

But market analysts say they expect the earnings to recover in the coming months especially during the summer travel peak season. Fuel prices, meanwhile, are also in the decline, helping airlines to cut operation costs.

UBS Securities analysts said both China Eastern and China Southern can expect domestic travelers to grow by 8 percent year-on-year in July while Air China can also expect a 7 percent rise of domestic travelers from a year earlier.

Profits of the "Big Three" airlines are expected to stabilize or start to grow in the third quarter compared with the same period last year, the analysts added.

Liu Shaoyong, board chairman of China Eastern, earlier said he also expected the company's earning to grow in the second half.

"For the whole year, China Eastern will not be in red, but profit margins might shrink from a year earlier," Liu said. "The situation is not supposed to deteriorate to the 2008 levels."