China Southern Seeks More State Aid

By Bradley Perrett

China Southern is asking for more government funding after reporting a loss that exceeded its last batch of state support.

After burning capital with a 4.8 billion yuan net loss for 2008, the airline, China’s largest, is not specifying how much it wants from Beijing, but says the more it gets, the better.

Typical of the industry, China Southern managed some business growth last year — passenger numbers were up 2.3% — but a modest rise in domestic demand was not enough to support profits in the face of international weakness.

Like most of the Chinese industry, China Southern has been only faintly profitable even in good times. Its operating performance is not strong enough to withstand the global recession, even though the Chinese economy so far is suffering far less than most of the world.

China Southern got 3 billion yuan in state funding through the recapitalization of its state parent last year. Much of the Chinese airline industry — but not all of it — has been granted funding from various levels of government because of the recession and a series of one-off factors that knocked demand last year.

Photo: SkyTeam