China Airlines Ltd (CAL, 中華航空) yesterday gave a positive outlook on earnings for this year, after the company weathered steep asset impairments last year.
Ahead of the release of its latest financial results next week, CAL said sales for last year could total NT$156.34 billion (US$5.34 billion), representing an annual gain of 10.7 percent.
That figure factors in steep asset impairments totaling NT$5 billion that were booked last year as part of efforts to update the carrier’s aging fleet, CAL chairman Ho Nuan-hsuan (何煖軒) told a news conference in Taipei.
“We choose to bite the bullet and book the entirety of last year’s charges to ensure the company’s growth prospects,” Ho said, adding that CAL is now in a much improved position.
With sales for last year hitting the second-highest level in the company’s history, CAL is confident about this year’s performance, Ho said.
Sales this year would be boosted by new long-haul routes, including non-stop flights to London that began in December last year, while gains in passenger and flight efficiency are expected as new Airbus A350 and Boeing 777 aircraft are deployed, Ho said.
He added that CAL is also negotiating code-share arrangements with Air France to add flights to Paris and other French cities to round out coverage of the European market.
Meanwhile, CAL said its low-cost carrier subsidiary, Tigerair Taiwan Ltd (台灣虎航), is expected to post net income of NT$550 million for last year, marking its first profit after a streak of losses since its founding in 2013.
Similarly, Mandarin Airlines (華信航空), the company’s regional carrier subsidiary, would see improved operating efficiency as it switches from costly regional jets to ATR 72-600 turboprop aircraft, which are more suitable for short-haul flights, Ho said.
However, Ho said that the company remains concerned about fuel price volatility and that in light of uncertainties, it is hesitant about reactivating its idle air cargo transport capacity.
Fuel prices surged to a two-year high of US$80 per barrel in the first two months of this year, before falling to US$75 per barrel this month, the company said.
To cope with volatility, CAL has implemented a fuel-hedging strategy with shorter durations at US$80 per barrel to prevent potential losses from a sudden drop in prices, CAL finance division vice president Jeffery Chen (陳奕傑) said.
CAL is preparing to launch its aircraft maintenance, repair and overhaul business through partnerships with Nordam Group Inc and Airbus SA, which is expected to begin contributing revenue next year, Ho said.
The business is highly lucrative, generating margins of between 20 and 30 percent, and would be a vital addition for the company over the next two decades, he said.
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