Weak passenger revenues could offset fuel cost savings at Big Three airlines
Lower fuel costs fail to offset higher tax and decline in travel demand at mainland airlines
Weak passenger yields last year could weigh on earnings at the mainland's Big Three airlines, with China Southern Airlines and Air China expected to report a drop in net profit despite benefiting from lower prices of jet fuel.
Together with China Eastern Airlines, they are scheduled to report their final results next week.
Lower fuel costs failed to offset the drop in revenue per passenger mile, which stemmed from a tax reform last summer and a decline in demand for seats in the front end of the cabin.
The shift to a higher value-added tax from the general sales tax trimmed airlines' top line.
Mainland officials also cut their travel budgets to comply with the anti-extravagance campaign launched by Beijing more than a year ago, hurting demand for first- and business-class tickets.
Net profit at Beijing-based Air China, which will announce its results on Tuesday, could slip 3 per cent to 4.47 billion yuan (HK$5.6 billion), while Guangzhou-based China Southern could report a 36 per cent slump to 2.35 billion yuan on Friday, according to the consensus of analysts polled by Bloomberg.
However, Shanghai-based China Eastern is expected to post on Wednesday a 5 per cent increase in net earnings to 2.94 billion yuan.
