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Air China Returns to Profitability in Q1 Amid Energy Shocks; Hong Kong Shares Slide 3%

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-- Air China (HKG:0753) returned to profitability in the first quarter, which could indicate resilience in the industry despite global energy shocks.

Attributable net profit at China's flag carrier reached 1.71 billion yuan, compared with a loss of 2.04 billion yuan the previous year, according to a Thursday disclosure to the Hong Kong Exchange.

Earnings per share stood at 0.10 yuan, versus a loss per share of 0.12 yuan.

The rebound in earnings indicates a resilience in China's aviation sector, especially as it recovers from fuel shocks, Bloomberg reported separately on Thursday.

The growth is also in line with expectations from Bank of America Securities.

Two other major airlines, China Southern Airlines (HKG:1055, SHA:600029) and China Eastern Airlines (HKG:0670, SHA:600115) also recovered from losses in the first quarter compared with the year-ago period.

Air China's turnaround could also mean alignment with other big Asian carriers such as Singapore Airlines (SGX:C6L) and Cathay Pacific (HKG:0293), the report said.

However, Air China and its government-controlled peers could be "adversely positioned" due to a more price-sensitive travel cohort in China, as well as high fuel costs which they struggle to pass on to passengers, Reuters quoted HSBC (HKG:0005) as saying.

The airline's revenue rose 11% year over year to 44.5 billion yuan from 40.0 billion yuan.

Passenger capacity jumped 7.6% to 95.2 available seat kilometers during the quarter. The rise could be attributable to demand during the Lunar New Year, Reuters reported separately.

Passenger throughput grew 10% to 42.1 million during the quarter, with domestic passenger count growing 10% to 35.8 million, international passenger count rising 12% to 4.9 million, and regional passenger count increasing 18% to 1.3 million.

Cargo and mail throughput during the quarter grew 4.3% to 362,995.4 tonnes, while cargo capacity jumped 3.6% to 3.48 billion available freight tonne kilometers.

Chinese international airline capacity could rise 13% year over year during the summer, equivalent to 91% of 2019 levels, Reuters said, citing Bank of America.

Shares fell 3% in Hong Kong during Thursday afternoon trading.

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