China: Korean peninsula crisis to trim Chinese airline profits

Beijing’s curbs on travel to South Korea are expected to take some shine off H1 results of China’s top-three airlines, which have slashed seat numbers on flights between the countries amid tensions over North Korea. Air China, China Eastern Airlines and China Southern are expected to report higher earnings this week on the back of foreign exchange gains, but cuts on lucrative routes to South Korea could crimp yields. Data compiled by consultancy Flightglobal for Reuters showed the three airlines and their subsidiaries had cut seat capacity by 41 percent by August compared to a year ago. The cuts came as China began to pressure South Korea over Seoul’s deployment of a US missile defense system designed to thwart any North Korean attack, but which China sees as a threat to its own security. The route cancellations accelerated in March after Beijing banned tour groups from visiting South Korea. In all, almost 400,000 seats have been cut. While Chinese airline yields were already falling due to rapid capacity expansion, analysts say the route cuts to South Korea were unhelpful.<br/>