China Southern A380. Courtesy, Airbus

China Southern Airlines (CZ) expects its first-quarter net profit to drop by more than half compared to the CNY1.24 billion ($190 million) reported in the year-ago quarter (ATW Daily News, April 29, 2011), according to a statement released by the Shanghai Stock Exchange.

The Guangzhou-based carrier cited the slowdown of the domestic growth rate, high fuel prices and the “reduction of exchange gain by a big margin” as main reasons for the gloomy forecast.

China’s other carriers are also bracing for a profit drop. “In the first quarter, domestic carriers increased operating expenses [mainly fuel costs] by 22%, which has a big negative impact over Chinese airlines’ financial performance. To make matters worse, domestic carriers got less exchange gain this quarter over the year-ago quarter,” Great Wall Securities aviation analyst Liu Kun said.

Chinese carriers reported a collective loss of CNY540 million in February (ATW Daily News, March 23) and CNY200 million in March (ATW Daily News, April 13).