|China's aviation industry watchdog, the Civil Aviation Administration Commission (CAAC), estimates the sector suffered a combined loss of up to two billion yuan (about HK$1.87 billion) in the first half. |
This compares with a combined loss of 560 million yuan a year earlier.
The news, coupled with profit warnings by some high-profile listed companies and a report Beijing had given banks until September to withdraw funds they illegally have in the stock market, contributed to a market slump.
Shanghai B shares lost 6.6 per cent while their Shenzhen-listed counterparts were down 3.4 per cent.
Meanwhile, a CAAC official yesterday confirmed reports of the two billion yuan loss in the first-half, due to high oil prices and an on-going domestic ticket price war.
On Sunday, China Eastern Airlines warned it expected a first-half loss, followed by analysts downgrading China Southern Airlines forecast interim profit.
They said fuel prices rose by about 15 per cent, year on year, in the first half.
While the CAAC aims to stamp out excessive discounting, it has no immediate plan to change the price deregulation policy implemented earlier this year - allowing carriers on 15 routes to discount ticket prices by as much as 40 per cent.
It was part of moves to enhance the industry's competitiveness to meet increased foreign competition after the mainland's entry into the World Trade Organisation.
The mainland has about 30 airlines and 10, under the administration of the CAAC, are slated to be merged into three giant groups in the next few years, led by China Southern Airlines, China Eastern Airlines and flagship carrier Air China.
The CAAC official pointed out that price pressure came not only from internal competition but also from increasing competition from other modes of long-distance transport such as railways and buses in the past few years.
Without mentioning specifics, he said the CAAC was studying possible measures to enhance its efforts to regulate the market and prevent a "vicious price war and market chaos".
Some airlines have already been penalised for offering discounts higher than those authorised, he said.
In 1999, the civil aviation sector made 790 million yuan in profits, mainly because of a ban on ticket discounting. It followed a six billion yuan loss in 1998 when the region's financial turmoil exacerbated a price war.
Separately, Reuters reported that China Eastern Airlines was aiming to merge with debt-ridden China Northwest by the end of this year and then with Yunnan Airlines early next year.