Chinese airlines seek government aid
SHANGHAI – The parent companies of Air China and China’s other big airlines are seeking government aid as they face hefty losses this year from high costs and weak demand, industry sources say.
Reuters reports that shares in the country’s three biggest carriers soared on the news, with the official Shanghai Securities News reporting that the parents of China Eastern Airlines and China Southern Airlines were likely to receive three billion yuan ($US440 million) each in cash injections.
The sources said, however, that discussions were still under way with a decision expected by the end of the year.
After years of double-digit growth, China’s air traffic began to show monthly declines from year-ago levels in May as a series of natural disasters and a slowing economy curbed travel demand, forcing airlines to cut loss-making flights.
China Eastern has grounded more than 20 planes since the middle of the year, or roughly 10 per cent of its fleet, local media have reported.
A sharp slowdown in the appreciation of the yuan since mid-July is adding to the burden of the country’s top three carriers, which booked a combined foreign exchange gain of 6.41 billion yuan in the first half.
The carriers hold a large volume of foreign-currency debt from aircraft purchases.
Air China, China Eastern and China Southern all posted losses in the third quarter and for the first nine months, and the whole sector will most likely end up in the red in 2008 for the first time since the SARS crisis in 2003, an industry executive told Reuters last month.
Ian Jarrett
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