ATW Daily News

China Southern plunges to big first-half loss, expects 'long period of hardship'

Wednesday August 20, 2008

China Southern Airlines posted a net loss of CNY1.17 billion ($169.7 million) in the first six months of 2008, a significant reversal from the CNY62 million earned in the year-ago period.

Operating revenue climbed 9.1% year-over-year to CNY26.78 billion against a 14% increase in operating expenses to CNY28 billion. CZ cited "various unfavourable factors including the US subprime mortgage crisis, ballooning inflation, stringent [domestic] monetary policies and natural disasters" as causes for the slower-than-expected market demand that impacted its results.

Domestic traffic grew 6.8% to 33.72 billion RPKs on a 5.1% increase in capacity to 44.9 billion ASKs, producing a load factor of 75.1%, up 1.2 points. Hong Kong and Macau traffic dipped 7.9% to 548 million RPKS on a 6.9% fall in capacity to 888 million ASKs. Load factor slipped 0.7 point to 61.7%. International traffic climbed 10.8% to 6.23 billion RPKs on an 8.5% lift in capacity to 9.65 billion ASKs, raising load factor 1.3 points to 64.6%. Passenger boardings increased 5.7% to 28 million and cargo volume rose 6.2% to 428,000 tonnes.

Looking ahead, CZ Chairman Liu Shao Yong expects the carrier "to undergo a long period of hardship" owing to the combined burdens of "insufficient market demand, fierce competition and high oil prices."

To survive, the airline vowed to "rationally deploy its transportation capacity, optimize its route structure, strengthen marketing and sales efforts, and raise revenues from first and business class cabins, as well as reducing production costs and the scale of infrastructure investment."

by Katie Cantle

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