China Southern H1 net jumps, traffic outlook cut

SHANGHAI, Aug 19 (Reuters) - China Southern Airlines (600029.SS), the country's largest carrier by fleet size, posted a jump in first-half earnings but cut its full-year passenger and freight targets because of weakening air traffic demand.

From January to June, net profit jumped 368 percent to 838 million yuan ($122 million) under Chinese accounting standards, helped by rising passenger and cargo volume and a 134 percent surge in non-operating income to 616 million yuan.

Sales rose 8.9 percent to 27.45 billion yuan, with operating costs up 15.1 percent to 25.47 billion yuan.

Under international accounting standards, net profit climbed to 847 million yuan from 168 million yuan, while total operating revenue rose to 26.78 billion yuan from 24.56 billion.

In a statement, China Southern chairman Liu Shaoyong warned that the airline industry faced a "long, severe winter" because of weakening traffic demand, high oil prices and increasing competition.

He pledged to adjust the carrier's capacity and route network and cut its operating costs in the second half.

China Southern said in July it would slash operating costs by 1.3 billion yuan this year, including a cut of 800 million yuan in planned investment on infrastructure projects.

For the full year, China Southern cut its passenger volume target by 3.2 percent to 59.78 million passengers, and reduced its target for freight volume by 8.5 percent to 902,300 tonnes.

It now expects an average passenger load factor in 2008 of 74.0 percent in 2008, down 0.5 percentage point from last year's actual number. Previously, it had predicted a 0.6 percentage point rise in the load factor to 75.1 percent this year. ($1=6.87 Yuan) (Reporting by Fang Yan; Editing by Keiron Henderson)