China Eastern Profit Drops on Lower Fares, Weak Japanese Routes

China Eastern Airlines Corp. (670), the nation’s third-biggest carrier by sales, posted a 28 percent decline in first-half profit because of discounted fares and weak demand on flights to Japan.

Net income dropped to 622 million yuan ($102 million) from 865.6 million yuan a year earlier, the company said in a Shanghai stock exchange filing today, citing international accounting standards. That compares with the 19 million-yuan median loss estimate of five analysts surveyed by Bloomberg News. Sales rose 2.7 percent.

Bigger rivals China Southern Airlines Co. (1055) and Air China Ltd. have also offered discounts as they seek to fend off competition from high-speed trains. China Eastern suffered from weak demand on flights to Japan amid a territorial dispute between Asia’s two biggest economies.

Shares of China Eastern rose 0.9 percent to close at HK$2.37 in Hong Kong trading today, before the earnings announcement. The stock has declined 23 percent this year.

Slowing economic growth at home and an outbreak of bird flu also affected travel in the first half, China Eastern said. Overall market demand may improve during the rest of the year, the carrier said in its statement.

The airline had 37.8 million passengers during the period, 9.2 percent more from a year earlier. It filled 79.3 percent of seats, while boosting seat capacity by 11.9 percent.

To contact the reporter on this story: Jasmine Wang in Hong Kong at jwang513@bloomberg.net

To contact the editor responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net

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