China's carriers set for biggest profit since 2010 on expansion

Morton Shen, a manager at a Shanghai-based company, no longer needs to spend more than 17 hours to fly to Madrid after a layover in Amsterdam. A Chinese airline now can whisk him direct to Spain’s capital in about 13 hours for a cheaper fare. “Most travelers would prefer the direct flight as transfers waste too much time,” said Shen, 29. Air China, China Eastern Airlines and China Southern, the nation’s “big three,” are increasingly ferrying passengers from the mainland to Europe and the US without hopping over in Hong Kong or Singapore. Hundreds of billions of dollars of new aircraft in the past decade have helped the state-owned airlines expand in a market where some 488m people -- or the combined populations of the US, Germany and the UK -- take to the skies every year. “Chinese travelers prefer to fly with Chinese airlines and hence, as the Chinese travel more, their airlines benefit,” said Steve Saxon, a Shanghai-based partner at McKinsey & Co. “Beijing, Shanghai and Guangzhou are all becoming powerful hubs as well, being able to draw traffic from China to Europe and US, increasingly competing with Tokyo, Seoul and Hong Kong.” On Thursday, the carriers will report earnings for 2016 that may validate their strategy of capacity expansion, new routes and cheaper fares. They may report a combined profit of about 19.5b yuan ($2.8b) for 2016, their best since 2010, according to estimates compiled by Bloomberg. Analysts say only currency swings and fuel price volatility have damped their earnings growth.<br/>