Hainan Airlines' net profit declined 8.2% to CNY503 million ($70 million) in the first half of 2019, as costs grew faster than revenues.

Operating revenue gained 6.4% to CNY35 billion on the back of healthy traffic growth, but operating costs grew by 7.9% to CNY31.7 billion. Despite that, operating profit was up 2.5% to CNY700 million.

As a group, RPKs were up 9.9% against a 12% increase in ASKs, pushing passenger load factor down slightly to 83.7%. In the cargo segment, RTKs gained 11% against a 55% increase in ATKs.

At 30 June, the group had CNY39.4 billion in cash and cash equivalents, up from CNY37.9 billion at the start of the period. It generated CNY3.8 billion cash from operating activities, compared to CNY2.7 billion in the previous corresponding period.

At the end of June, the group operated 474 aircraft, including 218 Boeing 737-800 and 60 Airbus 320 aircraft, 77 Embraer jets. It sold two Boeing 737-800s to NGF Genesis Limited for $27.5 million during the year, and has two other transactions to sell 18 other 737s and A319s in progress.

Besides macroeconomic conditions, oil price and currency fluctuations, the group warned that intensifying competition within the Chinese aviation market were significant risks.

“Continued regulation of [China’s] domestic civil aviation market will further intensify competition in the third- and fourth-tier markets. At the same time, the escalating trade war between China and the US will affect international flight routes,” it says.

The group is also exposed to liquidity risk, though it states that each subsidiary within the group is responsible for its own cash flow projections, while the parent company monitors short-term and long-term capital needs at the group level.

Subsidiaries China Xinhua Airlines, Air Changan, Shan Xi Airlines, Lucky Air, Tianjin Airlines reported net profits, while Urumqi Air, Fuzhou Airlines, GX Airlines were in the red.

Source: Cirium Dashboard