Search Tour
Your Budget
Tailor made China tours & customised China tours
Ask Question? Ask us here

Shanghai Airport profit plunges 49%

The Shanghai Pudong International Airport. Niu Yixin

The Shanghai International Airport (SIA) has posted a 49 percent fall in 2008 net profit, largely due to significant spending on a new terminal and runway.


SIA said its net profit for 2008 tumbled to 860 million yuan, down 49 percent from 2007, on sales of 3.351 billion yuan, an increase of 7 percent. Earnings per share (EPS) plummeted to 0.45 yuan in 2008 from 0.88 yuan in 2007.


The expansion of Pudong International Airport, SIA's major asset, in March 2008 was the reason for the profit drain, Wu Li, an analyst with Guotai Jun'an Securities, told China Daily.


"As much as 9.5 billion yuan was spent on Terminal 2 and the third runway. It takes time for the airport to reap returns from the new investment, but its balance sheet will reflect the expenses immediately: pushing its business costs up by 55.1 percent year-on-year," explained Wu.


In addition, the Civil Aviation Administration of China (CAAC) cut landing and take-off fees in March 2008, which directly eroded Shanghai Airport's profit by 10 percent, said Li Lei, an analyst with CITIC China Securities.


Thirdly, amid last year's steep fall in fuel prices, holding 40 percent stake in a fuel company also dealt a blow to Shanghai International Airport. Wu estimated the airport's loss on this item at 170 million yuan.


Pudong International Airport has also been hit hard as international passengers are cutting on travel expenses. Its passenger throughput saw a negative growth of 2.7 percent in 2008 year-on-year, and its handling capacity of cargo and mail dropped by 1.9 percent in January 2009, a third-month straight fall.


A report released by Shenyin & Wanguo Securities said Pudong Airport's net profit would further plunge by 8 percent in 2009.


Observers also brought back into focus an earlier proposal to combine the two airports, Pudong International and Shanghai Hongqiao.


"The major barrier to unification is how to assess Hongqiao Airport's net assets," said Li. As a non-listed company, Hongqiao Airport does not release financial reports, making its earnings unavailable to outsiders.


But analysts said Hongqiao Airport makes healthy profits each year. "The airport runs at full capacity, and the increasing momentum of its net profit should be higher than its same-town rival," said Li.


"Although the two airports focus on different segments, with Hongqiao Airport mainly catering to the domestic route and Pudong taking care of international flights, the clash is hard to avoid when seeking profits," said Wu.


(China Daily March 4, 2009)