June 26, 2008 / 3:02 AM / 11 years ago

China Southern sees airline recovery Q3 '09 -paper

SHANGHAI, June 26 (Reuters) - China Southern Airlines Co (1055.HK)(600029.SS) expects no recovery in the global airline sector before the third quarter of 2009, as it faces a weak global economy and record oil prices, the official Securities Times said on Thursday, citing Chairman Liu Shaoyong.

The surge in the oil price has boosted annual costs at China Southern, the country’s largest airline by fleet size, by nearly 5 billion yuan ($740 million) and the company has applied to the government for an increase in its fuel surcharge, Liu was quoted as saying.

The Beijing Olympics in August are not likely to benefit China Southern in the near term, as visa restrictions and security inspections are making air travel more difficult, while new business from planned direct flights between mainland China and Taiwan will be minor, he said.

The main piece of good news recently for Chinese airline operators has been the continuous appreciation of the yuan, which is reducing costs related to their foreign currency-denominated debt and contributed significantly to China Southern’s earnings last year and in the first quarter of this year.

Earlier this month, the official Shanghai Securities News reported that China Southern would cut services on more than 20 international routes, including flights to Los Angeles, Paris and Singapore, to stem losses.

China Southern shares surged on Thursday, after a pull-back in crude oil prices the previous day.

Its Shanghai-listed A shares were up 6 percent at 7.56 yuan at 0247 GMT, compared with a 0.8 percent drop in Shanghai's benchmark index .SSEC. The airline's mainland shares dipped to a 15-month low late last week.

Its Hong Kong-listed shares rose 2.75 percent to HK$3.36. (US$1= 6.86 Yuan) (Reporting by Samuel Shen; Editing by Edmund Klamann)

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