Airline's H1 net profit dives 84% as growth cools
Source: Bloomberg News |
August 28, 2012, Tuesday
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Print Edition
Print Edition
CHINA Southern Airlines Co, Asia's biggest carrier by passenger numbers, said first-half profit tumbled 84 percent because of an economic slowdown, higher fuel prices and currency fluctuations.
Net income fell to 449 million yuan (US$70.6 million) from 2.76 billion yuan a year earlier, the Guangzhou-based company said in a filing to Shanghai stock exchange yesterday. That compares with the 570 million yuan median of three analyst estimates compiled by Bloomberg News. Sales rose 13 percent to 48 billion yuan.
The carrier, China's biggest on domestic routes, filled a smaller percentage of seats in the period than a year earlier as expansion outpaced demand amid China's cooling growth. The yuan also weakened against the dollar, the first half-year decline since 2009, ending large currency gains that have previously supported Chinese airlines' earnings.
"Business travel demand in China was dragged by the economic slowdown, which was worse than expected," said Li Lei, a Beijing-based analyst at China Securities Co. "The carrier's plans to add more overseas flights will be good in the long term, but may pressure profitability in the short term."
The airline, China's only operator of Airbus SAS A380s, has also suffered from only flying the superjumbos on domestic routes, he said. The planes will be introduced on the Guangzhou-Los Angeles route in October, ending a yearlong wait caused by regulatory delays.
The carrier's passenger yields, a measure of average airfare, rose 3 percent in the first half from a year earlier. Its load factors, or the percentage of seats filled by paying customers, fell 1.1 percentage points to 79.5 percent, according to an earlier trading update. The carrier flew 41.2 million passengers during the period, up 7.2 percent annually.
Average domestic fuel prices in China were about 15 percent higher in the first six months than a year earlier, Li said. Jet kerosene prices averaged US$127.14 a barrel in Singapore trading in the period, compared with US$125.91 a year earlier, according to data compiled by Bloomberg News.
The airline said in July that first-half net income may slump over 50 percent.
Net income fell to 449 million yuan (US$70.6 million) from 2.76 billion yuan a year earlier, the Guangzhou-based company said in a filing to Shanghai stock exchange yesterday. That compares with the 570 million yuan median of three analyst estimates compiled by Bloomberg News. Sales rose 13 percent to 48 billion yuan.
The carrier, China's biggest on domestic routes, filled a smaller percentage of seats in the period than a year earlier as expansion outpaced demand amid China's cooling growth. The yuan also weakened against the dollar, the first half-year decline since 2009, ending large currency gains that have previously supported Chinese airlines' earnings.
"Business travel demand in China was dragged by the economic slowdown, which was worse than expected," said Li Lei, a Beijing-based analyst at China Securities Co. "The carrier's plans to add more overseas flights will be good in the long term, but may pressure profitability in the short term."
The airline, China's only operator of Airbus SAS A380s, has also suffered from only flying the superjumbos on domestic routes, he said. The planes will be introduced on the Guangzhou-Los Angeles route in October, ending a yearlong wait caused by regulatory delays.
The carrier's passenger yields, a measure of average airfare, rose 3 percent in the first half from a year earlier. Its load factors, or the percentage of seats filled by paying customers, fell 1.1 percentage points to 79.5 percent, according to an earlier trading update. The carrier flew 41.2 million passengers during the period, up 7.2 percent annually.
Average domestic fuel prices in China were about 15 percent higher in the first six months than a year earlier, Li said. Jet kerosene prices averaged US$127.14 a barrel in Singapore trading in the period, compared with US$125.91 a year earlier, according to data compiled by Bloomberg News.
The airline said in July that first-half net income may slump over 50 percent.
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