China Eastern Air sees profit hit by high oil prices

Monday, 7 March 2011 00:01 - - {{hitsCtrl.values.hits}}

BEIJING (Reuters) - China Eastern Air Holding, the parent of China Eastern Airlines, expects lower profit this year due to high oil prices, said Li Jun, the holding company’s deputy general manager.

“This year is not going to be better than last year. The impact of volatile oil prices will be large,” Li told Reuters in Beijing on the sidelines of a meeting of the advisory body to the Chinese parliament.

“2010 was the best year in China Eastern’s history. China’s economy recovered very quickly and we had the World Expo,” he said.

The Shanghai World Expo drew 72 million tourists to the city last year — a record for the world fair which has in recent years largely dropped off the world’s radar.

Cargo and passenger traffic will grow at a slower rate of about 12 percent this year from more than 20 percent in 2010, Li said.

Fuel accounts for 40 percent of China Eastern Air’s total costs, Li said.

Shanghai-based China Eastern is one of China’s top airlines with a quarter of the market.

China’s plan to build more high-speed trains linking its major cities will not have any major impact on the airline business, said Li.

China will open its $33 billion high-speed rail link between Beijing and Shanghai in June, state media reported in January, cutting the journey between the two cities in half to less than five hours.

Both the high-speed rail and the airline sectors are in the growth stage and the airline industry in China still offers tremendous growth potential, said Li.