An Air China passenger jet takes off from Shanghai Pudong International Airport on March 15. Photo: IC

China Southern Airlines, Asia's largest airline by fleet size, on Tuesday reported net profit for 2014 of 1.77 billion yuan ($285.46 million), down 6.44 percent from a year earlier.

The result makes China Southern the only airline to see a 2014 profit decline among China's top four carriers, the other three being Air China, Hainan Airlines and China Eastern Airlines.

In its annual report released Tuesday, the company attributed the slide in profit to foreign exchange losses resulting from yuan depreciation, which led to increased financing costs in 2014.

The yuan depreciated by 0.36 percent against the dollar in 2014, a factor that caused exchange losses for all Chinese airlines, news portal jiemian.com reported Wednesday, citing Yu Nan, an analyst with Haitong Securities.

The structure of China Southern's liabilities meant that it suffered more than other airlines from yuan depreciation, Yu said. With an asset-to-liability ratio of 76.6 percent, China Southern's dollar-denominated debts accounted for 97.84 percent of its entire debts in foreign currencies in 2014.

Nevertheless, with operating revenue rising by 10.38 percent to 108.31 billion yuan last year, China Southern actually registered a substantial improvement in its overall business and recorded strong performance in its international routes, Yu said.

Of the country's four biggest airlines, China Southern reported the fastest growth in revenue from overseas routes, which include both international routes and regional routes serving Hong Kong, Macao and Taiwan. Revenue from these overseas routes reached 25.55 billion yuan last year, up 20.46 percent year-on-year.

International interest

With increasing numbers of mainland tourists traveling overseas in recent years, China Southern is not the only domestic carrier that has been benefiting from the booming overseas route business.

In 2014, the top four airlines made combined revenue of 97.15 billion yuan from overseas routes, an increase of 11.14 percent from a year earlier. The growth was much faster compared with the 6.7 percent rise in the four carriers' overall business revenue.

Air China reported revenue of 37.88 billion yuan from overseas routes last year, the highest among the top four airlines, and it is continuing to add capacity on international routes.

The airline said that starting from March it is planning to offer flights between Hangzhou and Osaka in Japan as well as between Beijing and Melbourne, Australia. The company is also waiting for approval to operate on routes between Beijing and Auckland in New Zealand, and between Beijing and Astana, capital of Kazakhstan.

On top of the 40 percent growth in its international airline capacity in 2014, Air China plans to increase its international capacity by another 20 percent this year, with 5 percent growth planned for capacity on domestic routes, Xiao Feng, chief accounting officer with Air China, was quoted as saying by the jiemian.com report.

Meanwhile, Hainan Airlines, China's fourth-largest carrier, announced on March 26 it had placed a $7.7 billion order with Boeing for 30 787-9 Dreamliner planes. The company also said its revenue from overseas flights was 4.07 billion yuan last year, the lowest among the top four airlines.

The airlines' international expansion shows their desire to tap the growing demand from Chinese travelers. Last year, more than 100 million overseas trips by Chinese people were recorded for the first time, according to the China National Tourism Administration.

China Eastern Airlines saw the slowest growth in revenue from international routes among the big four airlines, with an increase of 4.38 percent year-on-year to 25.86 billion yuan. The carrier was also the only one out of the top four airlines to record a decline in revenue from regional routes serving Hong Kong, Macao and Taiwan in 2014.

Global Times