Jane Chen /Shanghai Daily news
China Eastern Airlines and Air China, the country's leading carriers,
yesterday denied a state subsidy rumor that has fueled their shares this past
week, Beijing Business Today reported.
The rumor circulated on the market
that China's aviation industry authority plans to cough up 10 to 20 billion yuan
(US$1.28-2.56 billion) to subsidize the two companies as well as China Southern
Airlines to increase their profitability.
In response, shares of air carriers
staged strong bounces, with Air China, the flag carrier, soaring by 30 percent
However, the air companies reacted with denials of the subsidy
Air China's board secretary Zheng Bao'an said he was unaware of the
capital injection plan and that the company has never received a notice
Despite that, Zheng seemed pleased with the capital
rumor, saying," I'm very much glad to hear of it."
Air China's parent, China
National Aviation Holdings Company, echoed Zheng's remark. Its publicity
minister Chu Chengping confirmed that he had not heard about the plan.
Eastern also refuted the rumor yesterday, as its board secretary Luo Zhuping
said there's no such plan.
The subsidy rumor came as the three carriers had
reportedly proposed to the State-owned Assets Supervision and Administration
Commission for subsidy to offset the rising fuel and operational costs, the
report said, citing insiders with China Eastern. But, so far, the state assets
authority has not replied.
In the first half of 2006, all Chinese carriers
were in the red except for Air China and Hainan Airlines, which reported net
profits of 147 million yuan and 20.8 million yuan respectively.
mounted to 1.47 billion yuan for China Eastern, 835 million yuan for Southern
Airlines, 163 million yuan for Shanghai Airlines and 135 million yuan for
Analysts blamed poor operation for the disappointing
performances, saying that the whole industry will likely fall deeper in the red
if income from fuel surcharges and foreign exchange is deducted.
In the first
11 months of 2006, fuel surcharge collection generated 9 billion yuan in profit
and benefits from foreign exchange, thanks to the yuan¡¯s appreciation, is
estimated over 2 billion yuan.
While the fleets increase around 150 planes
each year, the income growth of the aviation industry will further slow this
year, according to International Air Transport Association data.
rate is predicted to drop to 4.48 percent from 7.99 percent in 2006.