Hainan Airlines Earnings Increase 16%, Buoyed by Cheaper Oil

Hainan Airlines Co., the biggest private airline in China, posted a 16 percent
jump in full-year profit as oil prices tumbled, though the gain was limited by
foreign-exchange losses.
Billionaire Chen Fengs airline had net income of 3 billion yuan ($460.6
million) last year, compared with 2.6 billion yuan in 2014, the Haikou,
Hainan-based company reported Thursday. The company recorded a foreignexchange loss of 1.87 billion yuan, 250 times bigger than a year earlier,
following a surprise devaluation of the Chinese yuan in August.
China unexpectedly devalued its currency in August, triggering volatility in
foreign-exchange markets that has proved problematic for its airlines since
aircraft purchases are denominated in dollars. China operators ordered more
than $100 billion worth of aircraft from Boeing Co. and Airbus Group SE last
year. The yuan ended last year down 4.4 percent against the greenback, its
biggest annual loss since 1994.
Hainans larger rivals, the three big state-owned airlines, are set to report
bigger earnings increases next week, according to analysts estimates.
Mainland carriers have been aggressively expanding their international
offerings, and Hainan Air increased its long-haul capacity by 51 percent last
year, according to Bloomberg Intelligence analyst John Mathai.
Going Global

Fuel costs decreased almost 32 percent last year, while passenger traffic
increased 8.4 percent as the cheapest oil in more than a decade and a nohedging policy helped carriers in China.

Nationwide passenger traffic rose 11 percent to 440 million trips, according to

the Chinese aviation administration, which has projected 485 million
passenger trips this year. Chinese airlines now fly direct to 114 long-distance
destinations, up 150 percent in the past five years, according to Boeing.
Hainan Airs revenue declined 2.3 percent to 35.2 billion yuan last year as the
overall passenger load factor reached 88.2 percent. The carrier has started
flights to Chicago and Seattle from Beijing, the hub of Air China Ltd. The
airline also expanded its routes from Shanghai, the home of China Eastern
Airlines Corp.
To meet the expansion and surge in travel demand, Hainan Air placed an
order with Boeing last year for 30 787-9 Dreamliner planes valued at $7.7
billion. The carrier will take delivery of the first jet under this deal in 2021,
adding to Hainan Airs current Dreamliner fleet of 10. It operated a mostly
Boeing fleet of 202 at the end of last year.
Buying Binge

Hainan Airs parent HNA Group is on an acquisition spree, having added a 24

percent stake in Brazils third-largest carrier by market share, Azul SA, last
year and wrapping up its $7.6 billion takeover of jet lessor Avolon in January.
The group was founded in 1993 and its fortunes climbed after the resort island
of Hainan --known as Chinas Hawaii -- was designated a province and a
Special Economic Zone in 1988. Chen controls Hainans two main airports, as
well as hotels and travel agencies in the province. His company is also the
biggest property developer in the provincial capital of Haikou.