China Southern Airlines reveals 2024 mid-year report

China Southern Airlines disclosed its 2024 mid-year report. The company's revenue for the first half of the year was 84.79 billion yuan, up 18.0% year on year, achieving net profit to mother - 1.23 billion yuan, a year-on-year loss reduction of 57.3%. The company's revenue for the second quarter was 40.19 billion yuan, up 6.4% year on year, and net profit to mother - 1.98 billion yuan. The loss margin increased slightly year on year.

Passenger flow continued to increase year over year, and prices declined somewhat

As demand for civil aviation continued to grow in the first half of the year, the industry's flight volume continued to recover, and passenger flow continued to rise. The company's passenger capacity investment increased 21.7% year on year in the first half of the year. Its domestic routes increased 4.8%, international routes increased 161.1%, passenger turnover increased 33.5% year on year, and its domestic routes increased 15.7%, international routes increased 178.1%, passenger occupancy rate 83.07% year on year. In the first half of the year, due to the overall weak demand for domestic flights and the further recovery of international flight volume, the company's overall freight rates declined year-on-year, but they were still slightly higher than in the same period in 2019.

The company's passenger revenue in the first half of the year was 71.76 billion yuan, up 17.7% year-on-year.

Thanks to the rapid growth in cross-border e-commerce demand, the company's freight business operations remained strong. In the first half of the year, the freight business revenue was 8.73 billion yuan, an increase of 21.6% over the previous year.

Costs increased as business volume increased, utilization increased, and the company's operating costs per diluted unit increased in the first half of the year. Among them, aviation fuel prices rose slightly. The company's aviation fuel costs increased 22.3% year on year to 27.89 billion yuan. However, due to improved fleet operation efficiency, the company's non-aviation fuel cost was 50.67 billion yuan, and the unit ASK non-aviation fuel cost decreased 5.6% year on year to 0.2890 yuan.

Revenue recovery and reduction in exchange losses lower cost rates

Due to the impact of the company's revenue recovery and reduction in exchange losses, the company's sales, management, R&D, and financial expense ratios for the first half of the year were 3.92%, 2.30%, 0.29%, and 3.95%, respectively, down 0.22pct, 0.20pct, 0.03pct and 1.85pct, respectively.

Additional investment in Sichuan Airlines confirmed investment losses, and received compensation to increase non-operating income due to the company's capital increase to Sichuan Airlines in the first half of the year, confirming investment losses of 1.385 billion yuan. The company's investment income in the first half of the year was -1.02 billion yuan, down 1.32 billion yuan from the previous year; as the company received compensation of 1.98 billion yuan from aircraft operation, the company's non-operating income reached 2.09 billion yuan in the first half of the year, an increase of 1.87 billion yuan over the previous year. Overall, the company's performance is generally in line with expectations.

Investment advice

We are still optimistic that the civil aviation boom will gradually improve under strong supply constraints and rising demand. We expect the company's net profit to be 0.21 billion yuan, 5.22 billion yuan, and 10.3 billion yuan respectively in 2024-2026, maintaining a “buy” rating.

Risk warning:

Macroeconomic decline, sharp fluctuations in oil prices and exchange rates, security incidents