China Southern, China Eastern Airlines post annual losses on fuel costs, weak yuan

Monday, 1 April 2019 00:00 -     - {{hitsCtrl.values.hits}}

BEIJING, REUTERS: China Southern Airlines and China Eastern Airlines on Friday both posted a slump in annual profits, hit by rising fuel costs and a weak yuan currency, missing analyst forecasts. 

China Southern, the country’s largest carrier by passenger numbers, said its 2018 profit attributable to shareholders fell 49.6% to 2.98 billion yuan ($443.59 million), compared with an average forecast of 3.81 billion yuan based on 19 analysts, according to Refinitiv data. 

Revenue rose 12.66% on the year to 143.62 billion yuan, in line with growing demand for travel in the world’s fastest-expanding aviation market. 

The airline warned that big fluctuations in the yuan this year, along with rising oil prices, were likely to weigh on profits in the year ahead. 

Foreign exchange losses amounted to 1.74 billion yuan as the yuan fell against the U.S. dollar in the 12-month period, versus a gain of 1.79 billion yuan a year earlier. 

The yuan fell by more than 5% against the U.S. dollar last year, pushing up financing costs at airlines which have bought planes with mainly U.S. dollar-denominated loans. 

China Eastern, the country’s second-largest carrier by passenger numbers, reported a 57% slump in net profit last year to 2.71 billion yuan. It missed the average forecast of 4 billion yuan from 18 analysts, according to Refinitiv data. 

Revenue jumped 13.0% year-on-year to 114.93 billion yuan, the carrier said, while incurring foreign exchange losses of 2.0 billion yuan in the 12-month period. 

Their main rival Air China, in contrast, posted a 1.3% increase in its annual net profit, outperforming analysts’ forecasts, as better passenger yields outweighed the impact of rising fuel costs and a softer yuan. 

A gain on its investment in Cathay Pacific Airways that reported a profit for the first time in three years also helped boost performance. 

Chinese airlines are among carriers worldwide that have grounded Boeing 737 MAX aircraft over safety concerns. It is still unclear whether they will have to bear any costs, analysts say. 

China Southern has grounded 25 737 MAX 8 aircraft while China Eastern has 4, data from flight-tracking website FlightRadar24 shows. Air China has 15 Max 8 aircraft grounded. 

 

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