(d) Like many other International airlines, China Southern Airlines was severely affected by the COVID -19 epidemic, and as a result, the aviation demand dropped sharply for the 6-month period ended 30 June 2020 (1 January 2020 - 30 June 2020). During this period, the Group's Operating Revenue fell from RMB 72,939 million to RMB 38,964 million for the same period in the previous year (a fall of 46.8%). This resulted in a net loss for the group of RMB 8,179million for the period, compared with a profit of RMB1, 682 million for the 6 months ended 30 June 2019. Operating gearing (or operational gearing) refers to the mix of fixed and variable costs in a business and its ability to use its fixed costs to generate a profit Required (0) Explain what is meant by operating gearing and using the expenses note for Operating Expenses below (page 7), discuss whether the level of operating gearing for China Southern Airlines is high or low. (Note: you are not required to calculate the operating gearing level). (10) With regard to China Southern Airline's operating gearing level, discuss the implications of the COVID -19 epidemic on the company's financial performance. IV. Operating Expenses Total operating expenses in 2010 amounted to RMB148,608 million, representing an increase of 6.97% or RMB8,366 million comparing to that of 2018, mainly due to the increase in depreciation and amortisation expenses as impacted by the initial adoption of IFRS 16 on 1 Janaury 2019. Total operating expenses as a percentage of total operating revenue decreased from 97.65% in 2018 to 96.30% in 2019 Operating expenses 2010 RMB millions 70,566 Percentage 47.40 2018 AMB million 76.210 54.35 Flight Operations Mainly including: Jotul cu Aircraft operating lese charges Flight personnel payroll and welfare Maintenance exponses Aircraft and transportation service 42,014 1,412 12.700 13,057 11,467 12,704 8.70 OL 17.00 24.379 26.591 7.756 4,073 24.620 Promotion and send General written Depreciation and mortisation Impairment son property, plunt and equipment Other 3.770 2.74 16.57 10.20 1A 1,928 14A,GOR 0.01 1.30 1.820 Total operating expenses 100.00 140.242 100.00 (d) Like many other International airlines, China Southern Airlines was severely affected by the COVID -19 epidemic, and as a result, the aviation demand dropped sharply for the 6-month period ended 30 June 2020 (1 January 2020 - 30 June 2020). During this period, the Group's Operating Revenue fell from RMB 72,939 million to RMB 38,964 million for the same period in the previous year (a fall of 46.8%). This resulted in a net loss for the group of RMB 8,179million for the period, compared with a profit of RMB1, 682 million for the 6 months ended 30 June 2019. Operating gearing (or operational gearing) refers to the mix of fixed and variable costs in a business and its ability to use its fixed costs to generate a profit Required (0) Explain what is meant by operating gearing and using the expenses note for Operating Expenses below (page 7), discuss whether the level of operating gearing for China Southern Airlines is high or low. (Note: you are not required to calculate the operating gearing level). (10) With regard to China Southern Airline's operating gearing level, discuss the implications of the COVID -19 epidemic on the company's financial performance. IV. Operating Expenses Total operating expenses in 2010 amounted to RMB148,608 million, representing an increase of 6.97% or RMB8,366 million comparing to that of 2018, mainly due to the increase in depreciation and amortisation expenses as impacted by the initial adoption of IFRS 16 on 1 Janaury 2019. Total operating expenses as a percentage of total operating revenue decreased from 97.65% in 2018 to 96.30% in 2019 Operating expenses 2010 RMB millions 70,566 Percentage 47.40 2018 AMB million 76.210 54.35 Flight Operations Mainly including: Jotul cu Aircraft operating lese charges Flight personnel payroll and welfare Maintenance exponses Aircraft and transportation service 42,014 1,412 12.700 13,057 11,467 12,704 8.70 OL 17.00 24.379 26.591 7.756 4,073 24.620 Promotion and send General written Depreciation and mortisation Impairment son property, plunt and equipment Other 3.770 2.74 16.57 10.20 1A 1,928 14A,GOR 0.01 1.30 1.820 Total operating expenses 100.00 140.242 100.00