With the impact of SARS abating, however, the country's largest airline said business has recovered to normal and the company is looking to favorable performance in the second half.

The airline posted a net loss of 1.23 billion yuan (US$148.5 million) for the six months ended June, a sharp decline from a net profit of 123.23 million yuan (US$14.88 million) a year earlier.

Its rival China Eastern Airlines, the country's second largest airline, posted a severe net loss of 1.25 billion yuan (US$151 million) for the first half. Other carriers such as Cathay Pacific Airways, Singapore Airlines and Australia's Qantas Airways all reported losses for the same period.

China Southern attributed the loss to higher oil prices in the first six months, which led to a growth of 13.6 percent year-on-year in jet-fuel costs.

During the first half, China Southern's passenger revenue dropped 26.3 percent to 5.62 billion yuan (US$678.7 million) as a result of SARS scaring away travelers.

But cargo and mail revenue registered an increase of 27 percent to 921.88 million yuan (US$111.34 million) thanks to the launching of two international cargo routes.

In its prospectus on mainland listing in July, China Southern said it would make a full-year profit of about 202.6 million yuan (US$24.5 million), down 60 percent on the previous year.

"As of today, the company's air transport business has recovered to normal, and market demand has visibly increased," Yan Zhiqing, the company's chairman said in a statement yesterday.

"With continuing growth in China's economy and the negative impact of SARS subsiding, the market environment of China's aviation transportation business will show its potential for growth," he said.

The chairman also expected the recent free trade pact between Hong Kong and the mainland, as well as the SAR's closer integration's with the Pearl River Delta, to foster business growth. "As such, the company's is expected to improve in the second half of the year," he said.

(China Daily August 29, 2003)