Chinese govt moves to give domestic carriers a boost on int'l stage

09:33, May 07, 2010      

Email | Print | Subscribe | Comments | Forum 

The government recently announced a business-tax exemption for overseas flights and shipping services, but analysts said the help provided to airliners in lifting their profitability on international flights will be limited.

The tax exemption for airlines and shipping lines will be retroactively applied to all businesses going back to January 1 of this year, and will cover both passenger and cargo services, according to a Ministry of Finance statement that was released Thursday.

"It is another policy supporting the aviation carriers," Li Xuerong, an analyst with Shenzhen Zhongzhe Investment Consulting (SZIC), told the Global Times Thursday, adding the move is to help carriers regain stability after the financial crisis, as well as lift their competitive edge in international flights.

Air China, the country's largest carrier of international flights, said it expects to realize an additional 549 million yuan ($80.42 million) in 2010 due to the policy.

Goldman Sachs also predicted that the profits of China's top three carriers - Air China, China Eastern, and China Southern - will rise by 395 million yuan ($57.86 million), 337 million yuan ($49.36 million) and 196 million yuan ($28.71 million), respectively this year.

Air China holds about 50 percent of sales from overseas flights, followed by China Eastern Airlines with 30 percent and China Southern with 15 percent, Goldman Sachs said.

Shenyin &Wanguo Securities Thursday predicted more tax breaks could be ahead for air carriers, including reductions of tariffs on the import of aviation materials and fuel.

But analysts said sharpening the competitive edge of China's carriers in international flights depends on the efforts of the airliners themselves.

"The tax exemption cannot have a big impact on their international flight business, because the tax only accounts for 3.21 percent of their business income," said Wu Yunying, an analyst with Changjiang Securities.

Carriers' international flight business greatly trails their domestic flights, said Yao Jun, an analyst at China Merchants Securities, in an earlier interview with the Global Times.

In the first half of 2009, domestic passenger traffic volume increased by more than 20 percent, compared with a downturn of 10 percent for international flights.

"Currently, domestic carriers only occupy 25 percent of the international cargo business," said Li from the SZIC.

Shanghai Pudong Airport, a key international cargo hub, said overseas carriers accounted for 87 percent of its throughput, according to a 2009 report by International Aviation magazine.

Source: Global Times
  • Do you have anything to say?


Special Coverage
Major headlines
Editor's Pick
  • Inter Milan ladies
  • Special sceneries of Jordan through colorful sand
  • DPRK troupe performs "A Dream of Red Mansions"
  • Manage pressure ahead of gaokao
  • 10 most gorgeous pregnant stars in Oscar history
  • Cute kitty, say cheese!
Most Popular
Hot Forum Dicussion