China Eastern Sees ‘Big’ Drop in 2012 Travel-Demand Growth

China Eastern Airlines Corp. (670), the nation’s second-biggest carrier, expects a “big” drop in travel-demand growth this year because of an economic slowdown and the European debt crisis.

Demand for international passenger and cargo flights is “clearly falling,” predominately because European consumers are cutting spending, Liu Shaoyong, the carrier’s chairman, told reporters in Beijing yesterday, where he was attending the National People’s Congress. There will also be a “big difference” in full-year travel growth in 2012 from the previous year, he said.

The slowdown in overseas travel has prompted China Eastern to abandon an international expansion drive to instead focus on challenging China Southern Airlines Co. (1055) and Air China Ltd. (601111) on domestic routes. The Shanghai-based carrier is creating more competition even as China’s economy cools, threatening to damp growth in these markets as well.

“We are also seeing China’s economic growth under pressure,” Liu said. Traffic demand in the second half will probably be better than first half, he said.

China Eastern fell 0.7 percent to HK$2.86 at close in Hong Kong, the lowest level since Feb. 1. The stock has climbed 3.6 percent this year, compared with a 2.5 percent decline for China Southern and a 12 percent increase for the benchmark Hang Seng Index.

Li Jiaxiang, director of the country’s civil aviation regulator, also said on March 3 that passenger growth will slow this year. He didn’t elaborate. The government has pared its economic expansion target to 7.5 percent this year from an 8 percent goal in place since 2005 in a bid to create more sustainable growth.

China Eastern last year dropped an order for Boeing Co. (BA) 787 Dreamliners in favor of 45 smaller 737s because of delivery delays and slowing demand for long-haul international travel.

To contact Bloomberg News staff for this story: Jasmine Wang in Hong Kong at jwang513@bloomberg.net; Liza Lin in Shanghai at llin15@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net

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