China Southern 2019 Profit Down 9%; Warns Of COVID-19 Impact
In its 2019 annual report, released Mar. 30, China’s largest airline said that despite cutting frequencies internationally and domestically, it has enough cash flow for the 18-month review period based on current performance, contingency measures and factoring in available un-utilized banking facilities.
China Southern Airlines said its 2019 period, which ended Dec 31, 2019, narrowly missed the COVID-19 outbreak in mid- to end-January 2020. As the coronavirus pandemic continues to spread, as airlines cut flight frequencies and services globally, China Southern plans to focus on enhancing its business efficiency, network and freight service.
China Southern warned the COVID-19 outbreak will have an adverse impact on the airline’s business operation and operating revenue, and since the virus is still making its rounds across the globe, the airline is unable to estimate its full impact for this year.
In the meantime, the carrier is working toward its “dual hub” strategy at Guangzhou Baiyun Airport (CAN) and Beijing Daxing Airport (PKX). China Southern wants to strengthen the so-called Canton Route, launching more destinations from CAN, and enhance the Greater Bay Area network.
In 2019, China Southern introduced 13 routes from the new PKX airport and by March 2021, it aims to be the largest carrier there with a 43% share of movements.
China Southern also plans to maximize belly cargo demand and load factor, which was seen in February 2020 when cargo load factors increased due to the numerous flight cuts across the country, just as the country’s factories reopened after a long Chinese New Year.
In 2019, the airline integrated its freight resources and launched a mobile platform in China. It added that revenue for high yield cargo and temperature-controlled cargo increased 14% YOY.
China Southern posted a full-year 2019 profit of CNY2.64 billion ($378 million), down 8.8% from the year-ago period. Revenue increased 7.4% year-on-year (YOY) to CNY154 billion. Operating costs for 2019 climbed to CNY148.6 billion, up from CNY140.4 billion in 2018.
For 2019, domestic revenue—which accounted for 73.6% of total earnings—increased 6.5% YOY to CNY101 billion. Passenger demand, measured as RPKs, increased 9% YOY, outpacing a capacity increase of 8.8%.
Total RPKs and ASKs grew by 9% and 9.4% YOY, respectively, and total passenger carriage was up 8.4% to 151.6 million.