Bloomberg News

China Southern Annual Profit Drops 12% on Higher Jet-Fuel Prices

March 29, 2012

China Southern Airlines Co. (1055), Asia’s biggest carrier by passenger number, said profit declined 12 percent last year because of higher fuel prices and slower domestic travel growth.

Net income fell to 5.11 billion yuan ($810 million) in 2011 from 5.79 billion yuan a year earlier, the company said in a Hong Kong stock exchange filing late yesterday. That compares with the 5.8 billion yuan average of 11 analyst estimates compiled by Bloomberg. Total operating revenue rose 18 percent to 90.4 billion yuan.

China Southern, the nation’s biggest domestic carrier, Air China Ltd. (753) and China Eastern Airlines Corp. all posted lower profits last year as they contended with a 40 percent jump in fuel prices. Guangzhou-based China Southern also filled a smaller proportion of seats on international routes as it added new services to pare its reliance on cooling domestic markets.

“The growth rate is expected to slow down,” the airline said. Continued high oil prices will also “exert greater pressure on the profits of the aviation industry in 2012.”

The airline’s domestic passenger numbers rose 4.6 percent to 72.9 million last year, trailing the 14 percent growth rate a year earlier.

China Southern’s spending on jet fuel jumped 39 percent to 32.7 billion yuan because of higher prices and increased flights. Jet Kerosene prices averaged $125.67 a barrel in Singapore trading in 2011, 40 percent higher than the year before, according to data compiled by Bloomberg.

The company proposed to pay a final dividend of 0.2 yuan per share, compared with nothing a year earlier.

The airline, China’s only operator of Airbus SAS A380s, flew a total of 80.7 million passengers in 2011, 5.5 percent more than a year earlier. Yield, a measure of average fares, increased 8.1 percent.

International Expansion

On international routes, the carrier filled 73.9 percent of seat, a 0.9 percentage point decline. Yields fell 3.4 percent. Passenger numbers jumped 16 percent to 6 million, helped by the start of flights to Auckland, Perth and Vancouver.

The carrier, which has three A380 superjumbos, has only used the planes on flights within mainland China and Hong Kong as it awaits permissions to begin international services.

The airline rose 1.7 percent to HK$3.59 in Hong Kong yesterday, before the earnings release. It has dropped 8.7 percent this year, compared with a 12 percent increase in the benchmark Hang Seng Index.

Air China earlier this week reported a 41 percent decline in net income for 2011. China Eastern’s profit last year fell 7.7 percent.

To contact the reporter on this story: Jasmine Wang in Hong Kong at Jwang513@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net


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