Air China Ltd. (753), the world’s biggest airline by market value, predicted that passenger growth may slow to 4.4 percent this year after reporting a worse-than- expected decline in 2011 profit.
The carrier, including units, may fly 72.8 million travelers this year, compared with 69.7 million last year, it said in a Shanghai stock exchange filling late yesterday. Net income declined 41 percent last year to 7.08 billion yuan ($1.1 billion) under international accounting standards.
China’s biggest international carrier expects passenger growth to cool from last year’s 16 percent because of economic concerns in China, the U.S. and Europe. The company also faces rising fuel costs with prices having averaged about 10 percent higher in Singapore trading in 2012 than a year earlier.
“With capacity growth and weaker demand growth, the airline is likely to face difficulties in growing passenger yields,” said Richard Wei, an analyst with UBS AG. “The rising jet-fuel price is also expected to hurt profit-margins further.”
Net income last year fell after the carrier’s fuel expenses rose 44 percent to 34.7 billion yuan because of higher prices and increased flying. The contribution from a stake in Cathay Pacific (293) Airways Ltd. also slumped 68 percent to 959 million yuan after year-earlier one-time gains. Air China holds about 30 percent of Cathay Pacific.
The Beijing-based carrier, which is part-owned by Cathay Pacific, fell 0.2 percent to HK$5.11 in Hong Kong trading. It’s tumbled 12 percent this year, compared with an 11 percent decline for China Southern Airlines Co. (1055) and an 8.3 percent drop for China Eastern Airlines Corp.
Air China’s sales rose 19 percent last year to 98.4 billion yuan. Earnings per share fell to 0.58 yuan from 1.03 yuan. The carrier was expected to make a 2011 profit of 8.9 billion yuan, based on the average of eight analyst estimates compiled by Bloomberg.
The airline’s groupwide yields, a measure of average fares, increased 6.3 percent to 0.68 yuan per revenue passenger kilometer, it said in a press release.
The carrier proposed a final dividend of 0.118 yuan a share, little changed from a year earlier.
Air China, including units Air Macau and Shenzhen Airlines, filled 81.5 percent of seats last year with paying customers, an increase of 1.4 percentage points. On international routes, the load factor fell by 1.2 percentage points compared with a 2.8 percent rise on domestic routes.
The group fleet totaled 432 planes at the end of last year, according to a press release. That included 288 planes in the main Air China unit.
To contact the reporters on this story: Jasmine Wang in Hong Kong at Jwang513@bloomberg.net
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