Airline falls into the red - China Southern Airways

Business Asia, May 3, 1999

China Southern Airlines has reported its first loss since its establishment 20 years ago, with earnings being cut by slumping demand for travel in Asia.

The airline posted a 543.9 million yuan (US$65.7 million) loss for the year ended 1998 -- a sharp reversal from a US$137.7 million net profit in 1997.

The airline, based in China's southern Guangdong province, booked an exceptional gain of US$25.6 million from selling two Boeing 757-200s, which it continues to lease. However, the gain failed to offset a US$102.5 million operating loss.

Mr Yan Zhi Qing, China Southern's vice-chairman and president, said the company would see a yield improvement on domestic routes this year, stemming from a new government policy that prohibits domestic airlines from offering discounted airfares.

The carrier also hopes to raise load factors by cutting excess capacity created by an expansion program launched in 1995.