Industry analysts said on Thursday that the Chinese airline is set to end up with a heavy loss in 2008 amidst the country"s slowing domestic economy and the severe economic recession across the globe. During recent days, Air China, the flagship carrier and Shanghai-based China Eastern Airlines have been warning that they are most likely to post losses for three quarters of the year due to high fuel costs and weak economy.
A senior executive with China Eastern said, "Traffic did not pick up after the Olympics as we had previously expected. The situation improved a bit during the weeklong national holiday in October but the outlook is still murky, given the faltering global economy. There is little doubt that the whole industry will make losses now that the flag carrier has also issued a profit warning."
Since mid-July, there has been a sharp decline in the appreciation of the yuan, which is said to be one of the principal reasons for a drop in earnings during second half of the year. During the first half, rise of Chinese currency enabled top three airlines of China to book a combined foreign exchange gain of CNY6.41 billion yuan (USD$938.5 million).
The announcement by Air China on Wednesday that it expected a loss for nine months drove its shares to tumble on Thursday. The HongKong listed share of the firm dropped by 13.75 percent to HKD$2.76 by late afternoon trade. On the other hand, the Shanghai-listed shares of the firm fell their 10 percent daily limit to CNY4.67 yuan.
