Strong domestic traffic growth may see China Southern Airlines post higher profits today, but high oil prices and keen competition on the mainland have cast a shadow on its short-term prospects. China's biggest domestic airline is expected to announce a net profit of 368.5 million yuan (about HK$347.27 million) for last year, 8.3 per cent more than the 340.2 million yuan made in 2001, according to Thomson First Call consensus estimates. The forecasts of analysts surveyed by the South China Morning Post ranged from 228 million yuan to 533 million yuan. 'Mainland airlines have very thin margins but large revenue. A 0.5 per cent difference in margin forecast can make a big difference,' said CLSA analyst Liu Yun, who expected a net profit of 265 million yuan. He said passenger and cargo yields remained weak in a competitive market after the consolidation of the aviation industry. But Stacy Shi, an analyst with Bank of China International, expected net profit to surge 57 per cent to 533 million yuan as a result of robust domestic growth. War fears and fierce domestic competition top analysts' concerns. 'Oil prices will remain high if the war in Iraq drags on for a long time,' Mr Liu said. 'Deregulation of air fares may spark price competition among carriers.'