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  • Aug 21, 2014
  • Updated: 3:50am

China Southern Airlines

China Southern Airlines is based in Guangzhou in Guangdong Province in southern China. It’s the world's fifth-largest airline measured by passengers carried, and Asia's largest airline in terms of both fleet size and passengers carried. It was established in 1988 after a restructuring of the Civil Aviation Administration of China, and has grown since then through acquisitions and mergers to become one of China's "Big Three" airlines alongside Air China and China Eastern Airlines. It is a member of SkyTeam.
 

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Currency gains help avert loss for China Southern

With stronger yuan cutting debt, carrier stays in profit after tough first half hit by overcapacity

PUBLISHED : Tuesday, 27 August, 2013, 12:00am
UPDATED : Tuesday, 27 August, 2013, 4:33am

China Southern Airlines had its wings clipped by falling airfares and overcapacity in the domestic market in the first half of the year, with net profit dropping 21 per cent to 339 million yuan (HK$429 million).

The mainland's largest domestic carrier would have suffered a net loss of more than 1 billion yuan without a 1.5 billion yuan gain from appreciation of the mainland currency. The strong yuan helped to cut its US dollar-denominated debt, translating into a paper gain.

Analysts said falling passenger demand on the mainland, especially in the second quarter, was mainly to blame for the Guangzhou-based carrier's drop in profitability.

Passenger yield, which measures earnings per passenger per kilometre flown, tumbled 10 per cent to 59 fen from 66 fen a year earlier.

"China Southern needs to control its fleet growth in the second half to fend off the challenges in overcapacity and falling fares," said Kelvin Lau, an aviation analyst at Daiwa Capital Markets.

China Southern's fleet had grown 12.2 per cent year on year to 525 aircraft as of June. But passenger numbers rose just 6.5 per cent to 39.3 million, while cargo volume rose 2.3 per cent to 590,000 tonnes.

As 80 per cent of its ticket sales come from the domestic market, China Southern is more vulnerable to competition from high-speed railways than the mainland's other big airlines, Air China and China Eastern Airlines.

Air China will report its interim result today, while China Eastern will report on Friday.

China Southern's sales revenue from passengers and cargo transport dropped 1.9 per cent to 44.5 billion yuan. The company said that was mainly due to value-added tax reform on the mainland, which had trimmed its sales by 2.6 billion yuan.

Sales from its passenger division declined 1.6 per cent to 41.5 billion yuan as domestic route revenue dipped 3.5 per cent. However, international routes contributed 8.5 per cent more than in the same period last year after the carrier's Airbus 380s started flying from Guangzhou to Los Angeles and Sydney.

Cargo division sales dropped 6.6 per cent to 2.9 billion yuan due to softening freight rates to the United States and Europe.

China Southern's shares edged up 0.69 per cent to close at HK$2.92 yesterday.

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