China Southern Airlines’ net profit fell by more than a half last year as high oil prices, intensifying competition and currency weakness took a toll on business.
The Guangzhou-based carrier, which boasts over 800 passenger and cargo aircraft, cited currency weakness, high crude oil prices, an increasingly competitive market and the rapid expansion of China’s high-speed rail network as reasons for the decline.
China Southern blamed the US-China trade war for exchange rate depreciation and fluctuations in global crude oil prices, which were the main drags on its business. Neither is expected to vanish in the next year.
“Fluctuations in crude oil prices have led to changes in the company’s fuel costs,” which form a main part of the company’s operating cost. Operating expenses jumped 21 percent compared to the previous year.
Meanwhile, competition is increasing.
According to data from the China Railway Corporation, rail mileage of China’s high-speed network will reach 175,000 kilometres by 2025, up from 131,000 kilometres in 2018. China Southern’s flight routes that overlap with the railway networks will be affected, it said.
Competition from an increasing number of domestic low-cost carriers will also continue to intensify, said the company, which counts Xiamen Airlines as one of its eight subsidiaries.
Read Original Article