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AIR CHINA LTD. (601111)

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Air China To Boost Spending Amid Downturn; Committed To Airbus Orders

03/29/2012 | 02:36am US/Eastern

-- Air China to spend CNY28 billion boosting capacity in 2012

-- Airline expects 12% growth in international capacity

-- Carrier looking to fly 75 million passengers in 2012, up around 7%

(Adds additional comments from chairman on outlook, capacity growth and EU carbon-emissions scheme in fourth to eighth paragraphs)

By Joanne Chiu

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Air China Ltd. (0753.HK) plans to hike spending on capacity in 2012, especially on international routes and even in a poor growth environment for air traffic amid the worldwide economic slowdown, the Chinese flag carrier said Thursday.

The Beijing-based carrier has set aside CNY28 billion for 2012 capital expenditure, up from CNY21 billion the previous year. The money is mainly for fleet expansion.

Air China Chairman Wang Changshun warned at a news conference Thursday that the outlook for the aviation industry remains challenging owing to higher fuel prices as well as uncertainties surrounding international economic recovery.

But Wang added Air China remains confident in international air travel in the long run and plans to further enhance its international network by taking 12 wide-body aircraft in 2012.

"We plan to add 8% more capacity on domestic routes and 12% on international routes this year," Wang said. He predicted the domestic market to likely perform better than international as China's economy continues to grow rapidly.

Wang's comments come as Air China Tuesday posted a 41% decline in 2011 net profit to CNY7.08 billion--down from CNY12.0 billion the previous year--as it struggled with the combined effects of rising costs and an unexpectedly high impairment charge in the fourth quarter. Contribution from its 30%-owned Cathay Pacific Airways Ltd. also fell 61% to CNY1.33 billion in 2011.

Air China aims to carry around 75 million passengers in 2012 on the back of strong domestic travel. That is 7% more than around 70 million in 2011.

Separately, Wang said Air China remains committed to its existing Airbus orders. It has no cancellation or deferral plans in spite of the dispute between China and the European Union over carbon emissions.

Air China--which has 432 craft in its fleet--will take delivery of 56 more in 2012, 28 of which are Airbus.

-By Joanne Chiu, Dow Jones Newswires; 852-2802-7002; joanne.chiu@dowjones.com

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