Citigroup said it is maintaining its "sell" rating on China Southern Airlines on expectations the carrier will continue to struggle in the coming years, even as the government reportedly prepares to inject 3 bln yuan into its parent.

In a note, analyst Ally Ma said three bln yuan is far from enough to turn around China Southern, given the grim outlook for next year.

Even if the state capital is injected for free and is not dilutive of existing shares, which is unlikely, the impact on earnings next year would be only 15 pct, leaving the carrier with a loss of 340 mln yuan, Ma said.

"China Southern Airlines will likely record losses for years and its adjusted net gearing may reach seven times by end-2009," she said.

The analyst added that China Southern's focus on the domestic market does not shield it from the global slowdown, as it faces serious earnings risk from its exposure to China's light manufacturing and export-driven economy.

Ma also warned that global and domestic air travel demand will be even softer next year, leaving Chinese carriers "in their worst turmoil since 1998."

Citigroup has a 0.8 hkd price target on the carrier, China's largest in terms of fleet size.

China Southern's shares were down 1.64 pct at 1.2 hkd this morning in Hong Kong.

(1 usd = 7.8 hkd; 6.83 yuan)