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Shanghai Airlines posts heavy loss
( 2003-08-02 14:38) (China Daily HK Edition)

Shanghai Airlines, China's fifth-largest carrier by fleet size, said yesterday it suffered a heavy loss in the second quarter, buffeted by the deadly SARS virus.

The airline said the market had largely recovered, but it still expected to post a loss for the first three quarters of the year.

"The outbreak of the SARS virus in the second quarter had a terrible impact on the airline market," it said in a statement on the Shanghai stock exchange's Web site at www.sse.com.cn.

"At the same time, fuel and airport fee costs rose substantially from the same period last year, pushing the company to make a large loss," the airline said.

The second-quarter loss came in at 184.64 million yuan (US$22.30 million), compared to a 33.89 million yuan profit (US$4.1 million) in the same quarter last year. Revenue fell 25.6 per cent in the second quarter to 748.12 million yuan (US$90 million).

Even before the peak of the outbreak of severe acute respiratory syndrome, which depressed air travel after people chose to stay home and carriers grounded fleets, Shanghai Air had already posted a loss for the first quarter of this year.

"Although the airline's operations have recovered to the level of previous years now that SARS has passed, the company will still post a loss at the end of the next quarter as the first half loss was so severe," the carrier said.

Shanghai Airlines, backed by the city's government, operates a mixed all-jet fleet of Boeing and Bombardier aircraft to mainly domestic destinations, but also serves regional cities such as Macao and Ho Chi Minh City.

Revenue from international flights fell 12.98 per cent in the first half, while domestic flight revenue dropped 7.51 per cent.

"The airline will likely do better in the second half but as this loss was so serious, it's hard to say whether a full-year profit is possible," said Capital International Holdings analyst Xu Jie.

However, its lack of international exposure could prove beneficial, Deng Hongmei at China Everbright Securities said.

"Domestic routes, Shanghai Airlines' core business, have recovered much faster than global ones from the impact of SARS," she said. "It's therefore much better placed than China Eastern."

Shanghai Air's yuan-denominated A shares - open to select foreign investors - closed down 1.81 per cent at 7.59 yuan yesterday, having dived 15 per cent since mid-April.

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