China Southern profit soars as currency woes hit rivals

[SHANGHAI] Asia's biggest carrier China Southern Airlines on Friday posted a 35 per cent leap in profit in 2016, but the slumping Chinese currency dented earnings for the rest of the country's "big three" carriers.

Increasing demand is expected to propel China to overtake the United States within a few years as the world's biggest market for air travel in coming years.

China Southern turned a profit of 5.04 billion yuan (S$1.021 billion) in the year, up 35 per cent, capitalising on a continued boom in both domestic and overseas trips by Chinese travellers as the country's middle class swells.

The airline, which this week announced a tie-up with American Airlines, said it was helped by the slump in global oil prices, as lower costs for jet fuel padded its bottom line and helped offset foreign-exchange losses.

Like China Southern, flag carrier Air China and China Eastern Airlines also saw increased revenue as they expanded domestic and international route networks and grew their passenger numbers, but they nonetheless posted lower profit compared to 2015.

Air China earned 6.81 billion yuan for the year, down 3.6 per cent, while China Eastern's profit slipped 0.86 per cent to 4.50 billion yuan.

All three said they expanded their fleets in 2016 and envisaged yet more growth ahead in the China travel market despite a slowdown in the country's overall economic growth rates.

Air China said it envisaged "profound structural changes in China's air passenger market" in an earnings statement filed with the Hong Kong Stock Exchange, where all three have shares listed.

"Notwithstanding the decelerating pace of its economic growth, China's aviation market continued to enjoy a strong demand with huge market potential," it said.

American Airlines, the world's largest by various criteria, signalled its recognition of the Chinese growth potential with its plan to purchase US$200 million worth of the Chinese airline's stock - taking up 8.83 per cent of its Hong Kong-listed shares.

It is the first step in what it called a "long-term relationship" between two of the world's biggest carriers.

Each of China's "big three" grew their passenger numbers in 2016, led by China Eastern, which saw an 8.5 per cent increase overall, including a 16.8 per cent increase in passengers on international routes.

AFP