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China Southern Airlines first-half profit falls 11.6%

[SHANGHAI] China Southern Airlines on Tuesday posted a 11.6 per cent fall in first-half profit, as foreign exchange gains failed to offset the impact of higher fuel prices and lower returns on international flights.

China's largest airline by passenger numbers posted net profit attributable to shareholders of 2.77 billion yuan (S$566.33 million) over the six months to June, on an 11.5 per cent increase in revenue to 60.3 billion yuan.

Passenger yields fell two per cent, dragged down by a 7.5 per cent slump on international routes, even as revenue per kilometre grew 12.5 per cent.

Cargo yields rose 13.9 per cent on the back of a resurgence in cargo traffic globally.

The company said it expected the number of passengers travelling outbound from China to exceed 140 million in the second half of 2017, an increase of 14.8 per cent.

The Guangzhou-based carrier is experiencing pressure on international yields as it has expanded capacity rapidly in recent years while it has also cut lucrative routes to South Korea due to travel curbs enforced by Beijing.

The cost of jet fuel rose 28 per cent over the first half, according to analysts from brokerage UOB Kay Hian.

Such factors have dampened the benefits of the renminbi's appreciation against the US dollar this year.

Last year, Chinese airline profits were hamstrung by a weak yuan given the fact that carriers had taken many US dollar-denominated loans to buy planes as part of ambitious fleet expansion plans.