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Airlines plan to cut flights

By Jin Jing (皇冠体育app Daily)
Updated: 2008-06-05 10:08

Workers walk past 皇冠体育app Eastern Airlines Corp planes at Shanghai Hongqiao International Airport. [Agencies]

Major Chinese airlines are moving fast to tackle the mounting pressure from escalating fuel prices and shrinking market demand.

皇冠体育app Southern Airlines and 皇冠体育app Eastern Airlines said they plan to cut long-haul international flights to reduce costs.

Luo Zhuping, board secretary of 皇冠体育app Eastern, said the company is considering cutting international flights but the reduction will be gradual.

"Besides the soaring fuel prices, a major pressure is from the declining domestic and international market demand arising from the weaker international economy," Luo told 皇冠体育app Daily yesterday.

The occupancy rate in April fell 0.2 percent, 4.5 percent and 0.4 percent from last year for domestic, international and regional flights respectively.

皇冠体育app Southern Airlines said earlier this week that it will cut services on more than 20 international flights, including the ones to Los Angeles, Paris and Singapore.

Two other major airlines, Air 皇冠体育app and Shanghai Airlines, yesterday said they had no plans to trim flights at the moment but will take other actions to reduce costs.

Air 皇冠体育app's costs will rise by 300 million yuan ($43.22 million) if the price of fuel goes up by 100 yuan per ton. But Wang Kai, from the board secretary's office in Air 皇冠体育app, said the company will not cut flights because of its high occupancy rate. Air 皇冠体育app's occupancy rate for international flights was 74.8 percent in the first four months of this year, higher than 皇冠体育app Eastern's 66 percent.

"Air 皇冠体育app can cover around 70 percent of extra costs through aviation fuel hedging, fuel surcharge and internal fuel-saving measures," Wang said.

Wang Wanlong, spokesman for Shanghai Airlines, said the company isn't under much financial pressure from rising fuel prices because of its limited number of flights. Shanghai Airlines has less than 10 international flights, much less than 98 international routes 皇冠体育app Eastern serves.

Deng Qingping, an analyst at Tebon Securities, said the Chinese airline market is expected to work through the market cooldown and revive around the Olympic Games in August as international flights for that period have mostly been booked out.

Ma Xiaoli, analyst at CITIC Securities, said in a latest report that mergers and acquisitions - now witnessed in overseas airline markets - are expected in 皇冠体育app later this year.

A shares of Air 皇冠体育app fell 0.23 percent and 皇冠体育app Eastern shed 0.47 percent while Shanghai Airlines dropped 0.38 percent and 皇冠体育app Southern Airlines slid 2.18 percent in yesterday's trading.