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International Relations

China Southern boss suggests Boeing orders at risk

But alliance with American Airlines cruises along

China Southern Airlines jetliners at Guangzhou Baiyun International Airport in China.   © AP

HONG KONG -- As voices against U.S. President Donald Trump's plan to impose punitive tariffs on Chinese imports grow louder from various quarters in China, the head of a state-owned airline issued his own missive on Tuesday, suggesting American aircraft manufacturer Boeing as a target.

Wang Changshun, chairman of China Southern Airlines, said during Tuesday's annual earnings press conference that he is "staunchly against unilateral trade action taken by the U.S.," when asked about the impact of a trade war.

Wang doubles as chairman of the airline's unlisted parent, China Southern Air Holding, one of the top state-owned enterprises referred to as central companies, and words from their leaders are often viewed as reflective of the Chinese government's sentiments.

"Being a central company, we staunchly support the central government taking all sorts of measures," he said, adding that the company will maintain a "high degree of uniformity with the central party committee with Comrade Xi Jinping as the core." 

He proceeded to "provide some data" for reporters on Boeing's business in China. According to Wang, Boeing generated sales of $12 billion in China last year, supposedly 15% of its total sales. As one of the big three state-owned carriers, China Southern already owns 407 Boeing aircraft in a total fleet of 754, and it needs another 187 in the run-up to 2020.

Wang Changshun, second from right, chairman of listed China Southern Airlines and its non-listed parent China Southern Air Holding, states that his position is aligned with Beijing's in the event of a trade war with the U.S. (Photo by Kenji Kawase)

On the other hand, the Chinese airline is enhancing its relationship with American Airlines. Xie Bing, company secretary, said "both sides are wishing the relationship to be long-term, comprehensive and strategic," in order for them to "enhance competitiveness on a global scale." The U.S. airline paid 1.55 billion Hong Kong dollars ($198 million) to acquire a 2.7% stake in China Southern last August, while the two airlines have started a code-sharing partnership from January.

He also revealed that the two airlines will hold a high-level management conference Wednesday. Both Wang and Chairman and CEO Doug Parker of American Airlines are set to meet to commemorate the one year anniversary of the announcement of the alliance.

Wang also urged U.S. companies to speak up against the Trump administration. "I wish American companies will aggressively petition for a friendly consultation and resolution," he said.

The Guangzhou-based carrier announced its total revenue increased by 11.2% to 127.8 billion yuan ($20.3 billion) in 2017, supported by a 10.2% increase in passengers to 126 million. The average passenger load factor -- a key measure of seats filled per aircraft -- also gained 1.69 points to 82.2%.

Rising oil prices were largely offset by a stronger yuan. The airline marked a net exchange gain of 1.8 billion yuan in 2017, compared with a net exchange loss of 3.28 billion the previous year, pushing up its bottom line by 18.2% to 5.96 billion yuan.

Following the release of the results late Monday, its shares listed in Hong Kong and Shanghai moved in opposite directions on Tuesday. In Hong Kong, they dropped 1.8% to close at HK$8.57, while the benchmark Hang Seng Index gained 0.8%. On the other hand, China Southern's Shanghai-listed shares were up by 1.6% to 10.21 yuan, beating the Shanghai Composite's 1.1% gain.

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