Source: Bloomberg News Author: John Liu 04/15/2009
Subject Concerned: Government Opinion Airlines Cargo Aviation Fuel
China Southern Airlines Co., the nation's largest carrier, said it's "confident" of improving business performance in 2009 after posting its first loss in three years.
Government support and China's economic growth will fuel domestic travel, the carrier said in a Hong Kong stock exchange statement on Apr. 14.
The airline slumped to a 2008 net loss of 4.8 billion yuan (US$703 million) after natural disasters disrupted flights and a slowing economy stymied travel.
This year, China Southern's first-quarter passenger numbers rose 10 percent as the abolition of domestic fuel surcharges and government efforts to revive the economy spurred demand.
The overall Chinese aviation industry may return to profit in 2009 following a record loss in 2008, according to the nation's aviation regulator.
"China Southern is in a good position to post a profit this year because of its large domestic network and gains from lower oil prices," said Jack Xu, a Shanghai-based Sinopac Securities Co. analyst. "Cheaper ticket prices have also helped boost the air-travel market."
China Southern carried 15.4 million passengers in the first quarter. Cargo volume fell 18.5 percent to 175,400 tons.
Last year, the Guangzhou-based airline's passenger numbers rose 2.3 percent to 58.2 million, or 31 percent of the nation's total.
The carrier has climbed 44 percent in Hong Kong trading this year, outperforming Air China Ltd.'s 39 percent rise and China Eastern Airlines Corp.'s 15 percent gain.
On Apr. 14, the stock jumped 9.4 percent to HK$1.86.
China Southern's parent has also won a 3 billion yuan bailout from the government to help pare debts. The government agreed to inject 7 billion yuan into China Eastern's parent.
Flight Disruptions
Chinese airlines were forced to cancel hundreds of flights in the first half of 2008 because of snowstorms and then an earthquake. The global recession curtailed demand later in the year. Air China and China Eastern have both said they will likely report 2008 losses.
The two carriers also racked up combined paper fuel-hedging losses of 13 billion yuan last year after prices tumbled 70 percent in less than six months. China Southern avoided large hedging losses after closing all of its positions in September.
The airline also hedged less fuel than its rivals because of its greater reliance on domestic routes. Chinese airlines are unable to hedge purchases for internal services because of government price controls.