New | Hong Kong's unpopularity shows in airline balance sheets
Dropping numbers of China's tourists to Hong Kong has showed up as the sole sore spot in the balance sheets of the country's three largest airlines' record 11 billion yuan in profits for the first half, which jumped on low fuel and currency costs and mainlanders' strong wanderlust - for all places other than Hong Kong.
China Southern Airlines, which on Friday posted its best ever first-half profit, exceeding 3.5 billion yuan, turned out to be the only airline among the "big three" that did not record a decline in regional traffic that includes Hong Kong, Macau and Taiwan.
As the Guangzhou-based airline does not fly extensively to Hong Kong unlike Air China and China Eastern Airlines - the other two top airlines - it was the least affected by the dwindling tourist numbers to Hong Kong from China.
A record 36 per cent year-on-year traffic increase on its international flights led its growth and emerged as a new profit driver, China Southern said. Domestic traffic grew 10.72 per cent and regional traffic, 8.7 per cent.
In contrast, Air China reported a 8.1 per cent year-on-year decline in revenue contribution from regional traffic, while international traffic grew 10.2 per cent and domestic 2.29 per cent.
China Eastern reported a 6.18 per cent decline in regional traffic in terms of revenue passenger kilometres and a 4.06 per cent drop measured in passenger numbers.
"The regional market's decline was mainly due to a loss of traffic to Hong Kong. Taiwan has been quite steady," Air China told the .
According to the Hong Kong Tourism Board, overnight visitor arrivals to Hong Kong decreased 3.8 per cent to about 12.7 million for the first half of the year, with China's tourists contributing most of this decline.
While that continues to hurt Hong Kong's retail and tourism business, waning air travel demand to Hong Kong is not expected to stop Chinese airlines' full-year profits from soaring, analysts say, as regional traffic is a small business segment and most of it already comes from Taiwan rather than Hong Kong.
In the first half, regional traffic contributed 6 per cent of passenger revenue at Air China, 3.97 per cent at China Eastern, and just 2.61 per cent at China Southern.
Air China told the it did not expect the Hong Kong market to pick up in the second half. It plans to increase capacity on its international routes by about 20 per cent, domestic routes about 6 per cent, and "just about 1 per cent" for Hong Kong.
China Southern said it would deploy more capacity on its international operations, especially on its European, American and Oceania routes.
