China Airlines Ltd (CAL, 中華航空) yesterday gave a cautiously optimistic outlook for passenger traffic in the second half of the year, but rising crude oil prices might be a drag on profits.
Air travel demand is likely to gradually recover in the second half as border controls ease, CAL told shareholders at an extraordinary meeting in New Taipei City, citing robust ticket sales at its budget airline, Tigerair Taiwan Ltd (台灣虎航).
Tigerair on Wednesday launched a limited promotion, offering flights this winter for NT$798.
Photo courtesy of China Airlines
However, a robust response caused the Web site to crash within an hour, so Tigerair extended the promotion to midnight yesterday.
“This [sale] is a signal that air travel will pick up. We are prepared to offer passenger flights... The number of passengers might be limited as some disease prevention measures remain in place,” CAL chairman Hsieh Shih-chien (謝世謙) told shareholders.
CAL’s flights this quarter have doubled, compared with the same period last year, Hsieh said, adding that the airline would continually adjust the number of its flights depending on demand.
However, the price of jet fuel has climbed to US$140 per barrel — US$30 higher than crude oil prices of US$110 per barrel, the airline said, adding that such a considerable gap has never before been seen.
As fuel prices climb, they account for more of the airline’s costs, possibly eating up to 40 percent of its operating costs, CAL said.
Higher fuel costs and inflation could push up ticket prices, it said.
It is unlikely that tickets will be as cheap as they were in 2019, but how much higher they will go depends on demand, it added.
The outlook for its air cargo business remains rosy, as freight rates are high due to congestion at ports worldwide, CAL said, adding that it plans to increase its cargo fleet to 23 aircraft by the end of the year.
Separately yesterday, CAL denied rumors that the US tried to “force” it to buy Boeing 787 passenger planes, saying that it is still evaluating which wide-body aircraft to use when its Airbus 330 airplanes retire in 2027.
“It is an important decision, and we have not reached a conclusion yet,” Hsieh said.
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