China Southern to Post First Profit in 4 Years
Jan. 29, 2007
China Southern Airlines Co. said it recorded a profit last year, after three years of losses, on foreign exchange gains and improved operations.
The shares of the country's biggest carrier (in terms of fleet) rose in both Shanghai and Hong Kong after the carrier's statement to the Shanghai Stock Exchange on January 29, Bloomberg reported. The release didn't provide figures or elaborate on performance. The company will report full year earnings in April.
The Guangzhou-based carrier lost a combined 22.5 billion yuan (US$2.9 billion) between 2003 and 2005.
The yuan rose 3.4 percent last year, reducing the cost of the airline's dollar-denominated debt. China's airlines also raised fuel surcharges twice in 2006, allowing the carriers to pass more of their fuel costs on to passengers. The high costs had prevented them from turning rising traffic into profits.
China Southern may have gained 1.1 billion yuan from the rise in the yuan, while the higher fuel surcharges likely led to an increase of 2.63 billion yuan in the carrier's revenue, said Alan Lam, an analyst of Guotai Junan Securities (Hong Kong) Ltd.
"The company mainly gained from higher fuel surcharges starting the third quarter." Lam said.
The carrier's sales reached 46.5 billion yuan last year, the state-run Xinhua news agency reported on January 16, citing pre-audit figures. The airline posted a 2005 net loss of 1.85 billion yuan on sales of 38.3 billion yuan.
Passenger traffic rose 11.5 percent to 49.2 million, while cargo volume increased 5.6 percent to 818,000 tons last year, China Southern said on January 10.
China's airlines boosted their combined profit in the 11 months ended November to 4.73 billion yuan from 2.14 billion yuan a year earlier, Xinhua said on December 27, citing Yang Yuanyuan, director of the General Administration of Civil Aviation of China (CAAC).
China Southern is also expanding its cargo operations, which offer a higher yield than passenger traffic. The airline may order as many as 12 Boeing Co. 777 freighters, costing as much US$2.88 billion, the Deputy General Manager Liu Xiaoxiao said last week.
The airline is adding capacity to grab market share, particularly in Guangdong, China's manufacturing hub and richest province. The airline is based in the province, which borders Hong Kong.