Making money is hard for China's airlines

The devil is in the detail it is said. A recent press release from IATA as it deepens co-operation with China's aviation authorities shows just how significant the country's air transport business has become: 17 Chinese carriers are IATA members; China's airlines flew 138 million passengers and three million tonnes of cargo in 2005.

Impressive and growing numbers for sure. But are carriers making money out of all this activity? IATA's press release noted in brackets: "Industry lost CNY 2.4 billion ($300 million) in the first half of 2006, so we would rather not mention this."

Clang, sorry you just did. The first half has been a tough period with rising fuel costs, new competition, price regulation in the domestic market and overcapacity all hampering the ability of carriers to make money. The recent Airline Business World Airline Ranking in the August issue showed the big three - Air China, China Eastern and China Southern - collectively did actually made a $11.4 million net profit in 2005. However, Air China's $294 million profit compensated for losses at the other two.

Encouraging China to adopt e-ticketing as part of its Simplifying the Business campaign is one of IATA's main motivations for signing the memorandum of understanding with the General Administration of China to "expand strategic co-operation to further the safe, efficient and sustainable development of China's air transportation system".

IATA has long been an admirer of China's aviation minister Yang Yuan Yuan, whose backing has helped the country increase e-ticketing penetration from 0.2% to 60% of transactions in just 19 months. By the end of this year IATA believes this will rise to 80% and that China will achieve IATA's 100% e-ticketing target by the end of 2007.

IATA adds that all Chinese carriers are committed to making the end of 2007 deadline for the IATA Operational Safety Audit (IOSA). Seven carriers have already been put on the IOSA registry.

This is all good work. However, a renewed focus on the bottom line must certainly be on the agenda in the boardrooms of Chinese carriers.