A senior official of the Civil Aviation Administration of China (CAAC) said China Eastern Airlines Corp should focus on improving its management before requesting a resumption of flights between two lucrative cities in Yunnan that were suspended earlier this month.
The CAAC cancelled services between Kunming and the two cities - Dali and Xixiangbanna - after 18 China Eastern pilots turned back in midflight over a dispute with the management.
The suspension for an undetermined length of time is unprecedented.
Analysts said 78 China Eastern pilots reportedly tendered their resignations last week, further highlighting management problems.
'The suspension of flying is a warning to the carrier to strengthen its substandard management,' said CAAC director general Wang Ronghua yesterday.
The Shanghai-based airline yesterday posted a net profit of 210.8 million yuan (HK$234.7 million) for the first three months of the year under mainland accounting standards, compared with a 530.5 million yuan loss in the same period last year.
However, stripping out 1.06 billion yuan in exchange gains for the period, the company suffered an 844.2 million yuan loss.
Sales revenue increased 14 per cent to 10.6 billion yuan, while operating costs rose 12.5 per cent to 9.66 billion yuan.
Its bigger competitors reported gains. Air China's net profit rose 147 per cent to 1.04 billion yuan, while net income at China Southern Airlines rose 323 per cent to 796 million yuan under mainland accounting standards.
'The first priority of China Eastern should be to improve its management of pilots and operations,' said Mr Wang.
China Eastern company secretary Luo Zhuping said yesterday that the carrier would ask to resume the routes taken away by the CAAC this month as soon as possible, Bloomberg reported.
'The way the company is handling the crisis is very unprofessional,' said Citigroup transport analyst Ally Ma. 'Unless there is a consolidation between China Eastern and Air China, no capital injection into the company will improve profitability.'
China Eastern shares dropped 2.1 per cent to HK$3.26 yesterday.