Sat, Apr 06, 2019 - Page 12 News List

Higher fuel costs eat into net profit at China Airlines

HIGHER EXPENSES:An increase in revenue was offset by a 30 percent rise in fuel prices, despite the airline using more fuel-efficient Airbus A350-900s

By Kao Shih-ching  /  Staff reporter

China Airlines Ltd (中華航空) posted a disappointing profit for last year due to higher fuel costs amid plans to cut unprofitable flights and to adjust ticket prices to boost earnings this year, company spokesman Jason Liu (劉朝洋) said yesterday.

The carrier’s net profit plunged by 18.63 percent to NT$1.79 billion (US$58.1 million) from NT$2.2 billion a year earlier, or earnings per share of NT$0.33.

Revenue grew 9.34 percent to NT$170.71 billion, but operating expenses rose 14.43 percent to NT$153.5 billion, company data showed.

Liu attributed the revenue growth to a pickup in the number of passengers and the company’s price strategy.

China Airlines last year moderately raised prices on some of its most popular flights, especially during the peak season, he said.

However, the increase in revenue was offset by a 30 percent spike in fuel prices, despite the airline using more fuel-efficient Airbus A350-900 aircraft instead of the older A340-300, Liu said.

This year, the carrier would look to improve its fuel efficiency by taking measures such as monitoring weight loading, he said.

“Thankfully fuel price pressure is expected to ease this year. We forecast that oil is likely to trade at below US$85 a barrel,” Liu told the Taipei Times by telephone.

China Airlines plans to maintain the same fleet as last year, which would not help improve its available seat kilometers, a gauge of a carrier’s passenger-carrying capacity, and therefore not affect its revenue, but Liu said the airline would adjust ticket prices and cancel unprofitable flights in a bid to increase its earnings.

“We will initially review our short-haul flights, cut those with a comparatively low passenger load factor and adjust our flight schedules. We will then look at long-haul flights to see if adjustments are needed,” Liu said.

“Despite last year’s headwinds, we have a cautious, but optimistic outlook for this year and hope revenue can keep growing,” he said.

However, the airline faces another challenge this year as its personnel costs are set to increase by an estimated NT$114 million due to the need to dispatch more pilots based on an agreement reached with the Taoyuan Union of Pilots in February.

“A deal is a deal. Personnel costs will increase, so we can only manage other costs, but overall operational costs are likely to be lower if fuel prices keep falling,” Liu said.

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