Chinese airlines see profits shrink

SHANGHAI, 28 March 2013: Higher fuel costs and weak demand for air travel caused a slump in the net profits of two of China’s biggest airlines last year, according to annual reports released on Tuesday.

China Southern Airlines, the country’s biggest airline by fleet size, said that its net profits plunged 48.7% year-on-year to 2.62 billion yuan (US$422 million) in 2012.

In a separate exchange filing, flag carrier Air China said net profits dropped 34.5% from a year earlier to 4.64 billion yuan in 2012.

Both companies blamed high fuel costs, fierce competition and sluggish demand for international air travel for the decline in profits last year.

Guangzhou city-based China Southern said fuel costs, which accounted for 44.2% of its total operating costs, rose 14.5% year-on-year to 37.4 billion yuan in 2012.

Air China said its fuel costs increased 5.5% from a year earlier to 35.64 billion yuan in 2012, adding higher fuel prices would have a “relatively big impact” on future earnings.

Shares of China Southern dropped 2.33% to 3.78 yuan in Shanghai trading on Tuesday, while Air China fell 2.23% to 5.71 yuan.

In Hong Kong, where both companies are also listed, China Southern lost 1.15% to HK$4.29 (US$0.55) while Air China fell 0.44% to HK$6.72.

Sourced: ttrweekly