China Eastern Falls to Five-Month Low on Air China Outlook

China Eastern Airlines Corp. (CEA), the nation’s second-largest carrier by passenger numbers, fell to a five-month low in New York as larger competitor Air China Ltd. (753) said passenger growth may slow this year and on a report that the government may raise jet fuel prices for April.

China Eastern dropped for a second day in U.S. trading, losing 1.7 percent at the close of trading in New York to $16.54, the lowest price since Oct. 20. Shares traded totaled 62,841, or 384 percent of the stock’s average three-month volume, according to data compiled by Bloomberg. Air China, the world’s biggest airline by market value, fell 0.2 percent to HK$5.11 in Hong Kong.

Beijing-based Air China predicted that passenger growth may slow to 4.4 percent this year, from 16 percent in 2011, after reporting that net income declined 41 percent last year to 7.08 billion yuan ($1.1 billion). The carrier was expected to post 2011 profit of 8.9 billion yuan, based on the average of eight analyst estimates compiled by Bloomberg.

“The demand is there though costs have to come down” for airlines, said David Semple, director of international equity at the Van Eck Emerging Markets Fund in New York, which oversees $35 billion of assets, including Chinese stocks. “Clearly, fuel fears are also playing a large part in this.”

China may raise jet fuel prices for April by 330 yuan a ton to 8,099 yuan, Xinhua08.Com, the financial information website of the official Xinhua News Agency, reported on March 26, citing Zhongyu Information analyst Wang Jintao. Airlines may increase passenger fuel surcharges by 10 yuan, according to the site.

Shanghai-based China Eastern’s net income fell 7.7 percent to 4.58 billion yuan in 2011, the airline said on March 25, citing “cost increases and general downturn in the global aviation industry.” That missed the 5.1 billion-yuan average of eight analyst estimates compiled by Bloomberg.

To contact the reporter on this story: Leon Lazaroff in New York llazaroff@bloomberg.net

To contact the editor responsible for this story: Emma O’Brien at Eobrien6@bloomberg.net

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