China Southern Airlines on Tuesday posted a surprise loss for the second half of 2004, as costs soared, making it the only major Chinese airline to fall into the red last year.
China Southern reported a net loss of 314.18 million yuan (USD$38 million) for the six months to December 31 versus a profit of 873.61 million yuan (USD$105.6 million) for the year-earlier period as soaring fuel and other costs offset strong passenger growth.
That dragged China Southern's full-year net to a loss of 48 million yuan (USD$5.8 million) against a loss of 358 million yuan (USD$43.3 million) in 2003, when SARS dealt a devastating blow to the global travel industry.
Total 2004 operating revenue grew more than 37 percent to 23.97 billion yuan (USD$2.9 billion), but fuel prices rose substantially and accounted for nearly a third of operating costs, Chairman Liu Shao Yong said in a statement.
Other negative surprises included lower-than-expected traffic yield and higher costs such as maintenance and some one-off preliminary expenses, analysts said.
Liu said 2005 would be "a year of challenge" as the airline faces tougher competition in the China market.
"China Southern is the most vulnerable of China's three major airlines because it has heavier reliance on domestic routes," BOCI analyst Michael Chan said.
Chinese airlines cannot collect fuel surcharges on domestic routes and domestic fuel prices are above global markets.
China Southern operated 542 routes as at end-2004, of which 434 were domestic, 85 international and 23 Hong Kong regional.
China Southern said its passenger revenue, which accounted for 90.4 percent of its total traffic revenue, rose 40.6 percent year-on-year to 21.1 billion yuan (USD$2.55 billion) in 2004.
Passenger load factor increased by 4.6 percentage points to 69.2 percent, and passenger yield -- traffic revenues divided by revenue passenger kilometres -- remained steady at 0.57 yuan.
Robust passenger growth was offset by expenses incurred in relocation to the new Guangzhou Baiyun Airport, and integration costs after it bought China Northern Airlines and Xinjiang Airlines.
