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Downturn won't clip SA's wings
By Chen Hong (China Daily)
Updated: 2009-03-09 07:51
Shenzhen Airlines, the country's fifth largest carrier by fleet size and traffic, will stick to its domestic expansion scheme despite the global economic downturn.
"The first half of this year will be tough since the government's stimulus spending won't directly help the air transport industry and, if the economy deteriorates further, there will be far fewer air passengers," Shenzhen Airlines President Li Kun told China Daily. "But we are confident we will maintain double-digit revenue growth and will try to improve profits by cutting operational costs," he said. The 15-year-old company has 130 planes and wants to add 20 more this year. It added 26 last year. The airline also plans to expand from eight branches to 11 or 12. "The new branches and planes will allow us to offer more flexible schedules," said Li. The carrier is also trying to tap the Southwest China flight market through Kunming Airlines, in which it has an 80 percent stake. Kunming Airlines' maiden flight was on Feb 15. Shenzhen Airlines posted a 28.7 percent year-on-year rise in revenue in January and passenger turnover the same month was up 43.3 percent from last year, according to the company's figures. "The higher figures were mainly boosted by the Chinese Lunar New Year (which fell early this year). The economic situation is still severe and cannot be under-estimated," said Li. Shenzhen Airlines is one of China's biggest private companies and its 2008 revenue was 13 billion yuan, up from 10.3 billion yuan in 2007. The 26.4 percent increase is 4.39 times the airline industry's average. Shenzhen Airlines had a net profit of 26 million yuan last year, said Li, a dramatic tumble from its 640 million yuan profit in 2007 and 360 million yuan profit in 2006 but not bad in an industry that, as a whole, lost 20 billion yuan in China last year. Fuel price hikes, fallout from the global financial crisis and unexpected natural disasters in China, including unprecedented snowstorms at the beginning of 2008 and a devastating earthquake in May, all aggravated the air transport industry. Shenzhen Airlines spent more than 300 billion yuan helping earthquake relief efforts, according to company statistics. "The first half of 2008 was even worse for us than the SARS outbreak in early 2003," said Li. When the fuel price spiked, at one point accounting for half of total operational costs, the company saved more than 58 million yuan by reducing aircraft weight, optimizing flight routes and adopting other fuel-saving measures. It also cut maintenance and in-flight food costs, improved financial management and slashed its office expenditure budget. Shenzhen Airlines' costs per seat per kilometer surged from 0.04 yuan to 0.42 yuan in 2008 but the industry average rose to 0.5 yuan. The company managed to keep this index figure lower than other carriers without cutting jobs or adjusting salaries. "We're conveying a clear massage to our employees that we will pull through the difficult times with them," said Li. Shenzhen Airlines hopes the government might consider offering financial support to help weather the downturn. State-owned China Eastern Airlines and China Southern Airlines received capital injections of 7 billion yuan and 3 billion yuan, respectively, from the central government and Air China, China's biggest carrier, may get 9.5 billion yuan. Shenzhen Airlines is based in Shenzhen, which borders Hong Kong and is China's fourth busiest airport. (For more biz stories, please visit Industries)
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