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SHANGHAI—China Southern Airlines Co., Asia’s largest
carrier by passenger numbers, predicted “a long period
of hardship” and posted a first-half operating loss
after fuel prices doubled.
The
carrier will redeploy capacity and seek to boost revenue
from first- and business-class cabins to boost its
performance, chairman Liu Shaoyong said in an e-mailed
statement. The operating loss was 1.17 billion yuan
($170 million), compared with an operating profit of 62
million yuan a year earlier.
China Southern has plunged 81 percent in Shanghai trading
this year, the worst performance in the benchmark CSI
300 index, on concerns about rising fuel costs and
slowing demand. The country’s carriers were also forced
to ax hundreds of flights after the May 12 Sichuan
earthquake and because of snowstorms around Chinese New
Year, the country’s peak travel season.
“It’s
been an abysmally bad year for Chinese airlines,” said
Li Lei, an analyst at China Securities Co. in Beijing.
“Fortunately, the yuan didn’t let them down.”
China Southern booked currency gains of 2.64 billion yuan in
the first half, causing net income to jump fivefold to
847 million yuan, it said in a Hong Kong stock-exchange
statement. The Chinese currency gained 6.6 percent in
the period, about as much as it did in the whole of last
year, cutting the value of the Guangzhou-based carrier’s
dollar-denominated debts.
The
airline’s first-half fuel costs rose 21 percent because
of rising prices and the expansion of its fleet. Fuel
accounted for 37 percent of operating expenses. Higher
fuel prices will boost operating costs by 1.9 billion
yuan this year, the airline said on July 17.
The
price of fuel doubled in the year ended June in
Singapore trading and hit a record $181.85 a barrel on
July 3. It’s since slipped 26 percent in line with
falling oil prices.
Total
operating revenue rose 9.1 percent to 26.8 billion yuan
in the first half, the airline said.
China’s
“Big Three” carriers have all trimmed capacity because
of rising fuel costs. The government also allowed
carriers to increase surcharges on domestic flights as
much as 50 percent from July 1. China raised jet-fuel
prices for internal services by 25 percent in June.
Chinese airlines pay international fuel prices for
overseas routes.
China
Southern last month announced a plan to save 1.3 billion
yuan this year by trimming costs and infrastructure
investments. That included cutting the pay of its
chairman and other executives by 10 percent from July.
The
airline’s first-half passenger numbers climbed 5.7
percent to 28 million. It filled 73.1 percent of
available seats, a 1.2-percentage-point increase.
Chinese
airlines reported a combined 5.4-percent growth in
first-half passengers, lagging the aviation regulator’s
forecast for a 14-percent increase in full-year numbers.
“Traffic
is expected to rebound in September, after the Olympic
controls are lifted,” said Li. “There may be a
short-term rebound for airline stocks then.”
China
tightened visa regulations and beefed up security checks
ahead of the Beijing Olympics in a bid to ensure
trouble-free games, which run from August 8 through
August 24. (Bloomberg) |
