China Southern welcomes 787

China Southern Airlines, the nation's largest carrier in terms of fleet size, welcomed its first Boeing 787 Dreamliner in Guangzhou, Guangdong Province Sunday, as it looks to enhance its traffic capacity on international routes in the second largest aviation market after the US.

It is the first Chinese carrier and the 10th carrier worldwide to obtain the B787.

Designed with 228 seats and powered by the GEnx-1B engine, the B787 will first fly domestic routes from Guangzhou in Southern China to Beijing, then international routes from Guangzhou to Paris, Vancouver, London and Auckland, according to China Southern.

"China Southern will need more wide-body aircraft, long-distance aircraft and new models to expand in the international market," said a company press release e-mailed to the Global Times Sunday, adding that nine more B787s will arrive by the end of next year.

Currently, Boeing has received 41 B787 orders from China, including 15 from Air China, 10 from China Southern, 10 from Hainan Airlines and six from Xiamen Airlines.

"The B787 is better fit for China Southern as it flies from point to point for middle- and long-distance routes compared with the A380 which is better for hub transport," Li Xiaojin, a professor from Civil Aviation University of China, told the Global Times Sunday.

Li added that the B787 could be helpful in cutting the company's losses in future.

According to China Southern, the Guangzhou hub delivered a passenger growth of 15 percent in the first four months of this year, and the proportion of its international routes is close to 30 percent.

However, insiders warn that the industry faces overcapacity, as passenger growth cannot keep up with airlines' rising capacity, dimming the prospects for the company's profit this year.

"It is not the right time for China Southern to accept B787s," Su Baoliang, an analyst at CITIC Securities, told the Global Times Sunday.

Su said that the carrier could be facing passenger volume problems and has been bleeding profit from running the A380.

China Southern has introduced five A380s since 2011, aiming to expand its international routes out of Guangzhou, but the company reported a net profit decline of 82 percent to 57 million yuan ($9.29 million) in the first quarter of this year, and market rumors say that the A380s have created a total loss of 400 million yuan through the end of March this year.

According to Su, passenger growth across the industry is currently around 16 percent, lower than the capacity growth of 30 percent among three State-owned carriers, Air China, China Eastern and China Southern, and China's reduced GDP target could hinder expansion of the aviation market.

Meanwhile, ticket prices dropped in April by 26 percent year-on-year, and even in peak seasons it is hard to increase profit, which "could bring further losses for China Southern this year," Su warned.