China Southern Airlines’ Executive Vice President, Chen Gang, stated the carrier expects revenue to increase 20% year-on-year to CNY50 billion and passenger numbers to reach 70 million this year, driven by the recovery of China’s economy (Reuters, 04-May-2010). Meanwhile, the carrier stated passenger throughput from Guangzhou reached 69,000, an increase of 7.8% year-on-year, during the May Labour Holiday travel period from 01-May-2010 to 03-May-2010 (Carnoc.com, 04-Ma-2010).
China Southern Airlines targets 20% increase in revenue in 2010, 70 million pax
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China Southern Airlines deflects yield pressure concerns. Long haul focus shifts to North America
China Southern Airlines may be Asia's largest airline, but it has one of the smallest long haul networks. China Southern has shifted growth to international markets, which represented only 17% of capacity in 2009 but doubled to 34% in 2016. Its long haul plank has been Australia and New Zealand, funnelling traffic from around China down to its southern hub at Guangzhou. China Southern has met its objectives for Australia/NZ and now turns its focus to the market that has preoccupied most other Northeast Asian airlines: North America.
China Southern plans to increase flights from five daily to 11 daily, about the size that ANA is today – and larger than Air China and China Eastern. Although China Southern can build on the principle of using Guangzhou as a North-South hub, North America is a radically different proposition. Guangzhou's southern positioning limits exposure to the Chinese market that China Southern knows best. China Southern will need to target connections to Southeast Asia and India, which have only been a small component of Air China and China Eastern's network.
CAPA global airline financial outlook
Operating margin to reach new high in 2016, but this may signal a subsequent downturn. CAPA’s global airline operating margin model indicates that the industry was more profitable in 2015 than it has been for almost five decades. Moreover, the model predicts that world airline operating margins will rise further above previous historic peak levels in 2016. These new levels of profitability are mainly thanks to the low oil price environment, coupled with strong demand growth in spite of global economic growth rates that are far from exceptional.
Much of the industry is also benefiting from a period of relative capacity discipline. New revenue sources may also be helping, although their role in airline profitability is still emerging.
The macroeconomic and geopolitical backdrops provide the main risks to this forecast. Beyond that, the biggest challenge for the industry will then be to try to sustain margin levels, rather than to allow a peak to be followed by a rapid downturn, as has always happened in the past. But downturns can play a positive role in industry development, possibly even stimulating consolidation.