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China Southern profit up 117pc to US$571.2 million, sales rise 2.9pc
GUANGZHOU's China Southern Airlines, Asia's biggest carrier by passengers, posted a 117 per cent year-on-year net profit increase to CNY3.7 billion in 2015 (US$571.2 million) drawn on revenues of CNY111.4, up 2.91 per cent.
Fuel costs dropped 30.3 per cent to CNY26.2 billion. But a CNY5.95 billion exchange loss resulting from the weakening yuan helped to counterbalance the profit growth.
Analysts said the airline would have made more money had there not been a 6.2 per cent devaluation of the yuan in the second half of last year.
This meant it had to pay more interest on its US-dollar denominated debt. The airline has outstanding debt amounting to CNY136.7 billion yuan, the bulk of which is denominated in US dollars.
The airline's international business grew 32 per cent last year as measured by revenue passenger kilometres, but net yield declined 10.26 per cent on international routes and 1.96 per cent overall, thus making less money on each passenger.
CLSA analyst Rajani Khetan said the rapid international capacity growth of Chinese airlines was "worrying." She believes their yields on international routes will come under pressure this year.
"The pace of accelerated capacity growth on China's international markets in 2016 suggests yield will be under severe pressure. We believe all airlines will see yields fall," Mr Khetan wrote in a note.
But Kom Ajith, director of Asia transport research at UOB Kay Hian in Singapore, said that despite China's slowing economy, there was sufficient outbound travel demand to support the capacity growth.
China Southern had 667 planes at the end of last year, a third of which were on lease.
Fuel costs dropped 30.3 per cent to CNY26.2 billion. But a CNY5.95 billion exchange loss resulting from the weakening yuan helped to counterbalance the profit growth.
Analysts said the airline would have made more money had there not been a 6.2 per cent devaluation of the yuan in the second half of last year.
This meant it had to pay more interest on its US-dollar denominated debt. The airline has outstanding debt amounting to CNY136.7 billion yuan, the bulk of which is denominated in US dollars.
The airline's international business grew 32 per cent last year as measured by revenue passenger kilometres, but net yield declined 10.26 per cent on international routes and 1.96 per cent overall, thus making less money on each passenger.
CLSA analyst Rajani Khetan said the rapid international capacity growth of Chinese airlines was "worrying." She believes their yields on international routes will come under pressure this year.
"The pace of accelerated capacity growth on China's international markets in 2016 suggests yield will be under severe pressure. We believe all airlines will see yields fall," Mr Khetan wrote in a note.
But Kom Ajith, director of Asia transport research at UOB Kay Hian in Singapore, said that despite China's slowing economy, there was sufficient outbound travel demand to support the capacity growth.
China Southern had 667 planes at the end of last year, a third of which were on lease.
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