China Southern Airlines on Thursday reported a 29.9 per cent rise in 2016 net profit, below analysts’ expectations, as a weaker yuan put a dent on strong domestic demand for overseas travel.
China’s second-largest carrier by passenger numbers reported profits attributable to shareholders of 5.06 billion yuan (Dh2.69bn), its strongest performance since 2011. Analysts polled by Reuters had forecast reported net income of 5.47bn yuan.
Revenue rose 2.9 per cent year-on-year to 114.8bn yuan, against a 4.7 per cent rise in passenger traffic, it said. It suffered 3.27bn yuan in foreign exchange losses due to the weakening yuan.
Its yield per revenue passenger kilometre fell 5.6 per cent, after the airline grew passenger capacity by 8.6 per cent over the year.
Chinese airlines have been aggressively ordering new aircraft to take advantage of strong demand for outbound travel, which has outpaced domestic growth. However, the loans to purchase the aircraft are mainly denominated in US dollars, causing them losses as the yuan depreciated against the dollar.
China is the world’s fastest-growing aviation market and is expected to displace the United States as the world’s largest around 2024, according to the International Air Transport Association.
Shares in China Southern, which this week announced that it will sell a 2.7 per cent stake to American Airlines, closed down 3.49 per cent on Thursday, against a 0.37 per cent fall in the Hang Seng index.
* Reuters
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