China Southern Airlines is likely to scrap its annual bonus payout to trim expenses, according to sources.

The nation's biggest carrier by passenger numbers had earlier cut its 2008 spending by 1.3 billion yuan through a series of measures.

An employee of the Guangzhou-based airliner, who spoke on condition of anonymity due to the company's confidential policy, said he was not aware of the bonus cancellation but added there has been a good response to the 2008 spending cuts.

China Southern launched a campaign to cut spending in July last year after cutting executive salaries by 10 percent.

"We want our staff on the management level to feel the pressure and spend sparingly," said the insider.

"Thanks to these policies, China Southern has made a profit of 28 million yuan in the first nine months of 2008, outstripping Air China and China Eastern Airlines to become the only profit-making State-owned carrier," said Zhang Xun, an analyst at TX Investment Consulting Co.

However, analysts are of the view that the fourth-quarter profits of airlines may be hit by the demand slowdown. Last week China Eastern said it is coming out with 256 measures to stem losses, including a 10 to 30 percent salary reduction for the management team.

Rao Xinyu, board secretary of Air China Ltd, however, said the airline has no plans to cut executive salaries for now.

"Cost control has always been our pursuit," said Rao. But she did not rule out the possibility of a pay-cut policy in the future.

(China Daily January 14, 2009)