Air China Ltd In Deep Water Due To Current Economic Downturn

Posted on August 30th, 2012 by in Aviation News

There is no escaping from current unfavorable economic conditions even if you’re one of the country’s market leaders of the aviation industry. Air China is one such company that is suffering rapid decreases in earnings and profits because of external economic factors. This is the newest development in a list of profit losses for many large airlines in China.

Air China has confirmed that its profits of the first half have fallen badly and a decrease of about 77% in income has affected them adversely. They are also faced with other problems such as high prices of aviation fuel, increased competition and a rapidly declining economy. Air China is one of about 3 Chinese airlines that are owned by the state. Many other enterprises and banks have also been affected by the current economic situation.

Many companies and other bodies in China are wasting no time in creating a lot of hype around the profit loss situation. Airlines in particular are suffering because of the fall in income levels around the country. Beijing is being pushed to come to a conclusion and deal with the downturn the Chinese economy is facing. China is one of the world’s most prosperous economies.

Air China has made its losses public by stating that its net income has taken a hit and been reduced to $149 million. The share price of the airline has also fallen. The share price was previously 0.33 Yuan and is now 0.08 Yuan. The airline is also claiming that its losses are mounting up due to low demand for air travel and forever increasing operating costs. There is also an unhealthy level of competition in the declining industry at this point in time.

Since an assessment of the losses of the first half has already been made, the company is viewing the months to come with anxiety. Anything can happen and there will be a fair number of challenges for the airline if it is to ever bounce back to profitability. Fuel prices have experienced an unprecedented increase and are now about 10% higher than they were in 2011. Wages have also had to be increased recently and this all spells trouble for one of China’s biggest airlines.