Chinese state airlines apply for emergency funding

Two of China’s three largest state airlines have applied for emergency government subsides to combat rising costs and slackening demand.

China Eastern Airlines and China Southern Airlines have each applied for subsidies following record losses. Chinese state media has reported the government would pay each Rmb3bn (US$440m).China Eastern lost a record Rmb2.33bn (US$341m) in the third quarter this year, compared with a profit of Rmb976m (US$143m) in the same period a year earlier. Meanwhile China Southern lost Rmb810m (US$119m) in the third quarter this year.

China’s airlines have been shown a sharp drop off in demand this year, following several years of double-digit growth.

The number of airline passengers within China rose 2.4 per cent in the first 10 months, considerably short of the government’s forecast of 14 per cent annual growth.

According to the Financial Times, weak demand has forced China Eastern to ground an average of 20 aircraft of its 200-strong fleet this year, and China Southern has been cutting the number of its international flights.

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A senior China Southern official, who asked not to be named, told the FT: “Given the background of the global economic recession, it is crucial that we get this money.”

Whilst officials blamed the slump on natural disasters such as the May 12 Sichuan earthquake - but analysts say that the weakening economy and stringent security operations, and a rise China’s Renminbi currency against the US Dollar are the main reasons for the drop in demand.
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