While the European Union is asking for emissions reductions, Chinese carriers will not be accepting these measures according to the Times of India. As a small gesture toward reducing emissions, China Eastern Airlines Corp. Ltd. (ADR) (NYSE:CEA) is having special winglets put on its Airbus A320 aircraft. But this is not just a climate change fighting move; the winglets make economic sense for China Eastern Airlines Corp. Ltd. (ADR) (NYSE:CEA) as well. In an industry the consumes so much fuel, improved fuel consumption should benefit China Eastern Airlines Corp. Ltd. (ADR) (NYSE:CEA)‘s bottom line as it helps to reduce aircraft emissions.
As China Eastern adds winglets to its fleet, China Southern Airlines Co Ltd (ADR) (NYSE:ZNH) is making big moves in the new aircraft department. Bloomberg is reporting that China Southern Airlines Co Ltd (ADR) (NYSE:ZNH) will be the only Chinese airline to operate both The Boeing Company (NYSE:BA) 787 Dreamliners and Airbus A380 superjumbos. This fleet modernization strategy should help with fuel costs but the capital used to acquire these planes means China Southern Airlines Co Ltd (ADR) (NYSE:ZNH) is betting on higher travel demand to drive earnings growth over the coming years.
Investors tend to see airlines as operating in a largely developed market where capacity cutting is a higher priority than creating new routes. But in emerging markets such as China, a growing middle class is asking for more leisure travel and expanding industries are demanding more business travel. Air China, China Eastern Airlines Corp. Ltd. (ADR) (NYSE:CEA), and China Southern Airlines Co Ltd (ADR) (NYSE:ZNH) all offer investors exposure to this market but are also accompanied by political risks in addition to the risks inherent in the airline industry. For investors willing to bear the political risks, these Chinese airlines may be worthwhile investments as a play on growth in China.
The article A Look at Foreign Airlines Part Three: China originally appeared on Fool.com and is written by Alexander MacLennan.
Alexander MacLennan owns shares of Delta Air Lines. This article is not an endorsement to buy or sell any security and does not constitute professional investment advice. Always do your own due diligence before buying or selling any security. The Motley Fool has no position in any of the stocks mentioned. Alexander is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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