China Southern jumps most in more than a year on strong yuan; Cathay also gains

Yuan forwards rose toward a two-year high with the stronger Chinese currency helping the nation's airlines by reducing the cost of dollar debts built up from purchasing Boeing and Airbus aircraft, as well as other expenses such as fuel. China Southern had CNY66.6 billion (USD10 billion) of debt at 30-Jun-2010, with the carrier's US dollar-denominated borrowings amounting to USD3.3 billion.

Shares in China Eastern gained 3.7%, with Air China shares gaining 3.2%. Shares in Hainan Airlines slipped 1.7%. In traffic news, China Eastern and Air China both reported double-digit passenger growth and load factor improvements in Sep-2010. China Eastern passenger numbers increased by 54% to 5.6 million with an average passenger load factor of 89% (+8.9 ppts) with cargo volumes increasing 32%. Air China reported a 20% jump in passenger numbers to 4.0 million with an average load factor of 82.1% (+5.5 ppts) with less spectacular cargo volume growth of 8%.

Shares in Cathay Pacific also gained strongly yesterday, up 6.5% to HKD22.80. IFR yesterday reported that Credit Suisse as sole bookrunner has launched a 40 million share selldown in Cathay at a fixed price of HKD21.50 which is 5.7% discount on yesterday's closing price. The selldown is by an undisclosed seller who is looking to raise HKD860 million (USD110.5 million).

The carrier also welcomed the commitment made by Hong Kong SAR Chief Executive Donald Tsang in his policy address that the Government would strive to enhance Hong Kong's status as an international centre for financial services, trade, shipping and logistics, so as to better leverage its unique advantages and functions during the National 12th Five-Year Plan period. Cathay Pacific also welcomed the midfield expansion project at HKIA which begins next year and will increase capacity and ease congestion.

Hong Kong shares ended at their highest level in 28 months (since 06-Jun-2008) on Wednesday, supported by broad-based blue-chip gains and after property firms rebounded from sharp losses as investors discounted new government measures to rein in surging home prices. Also in North Asia and Japan shares rose for the first time in four sessions following upbeat machinery-orders data.

China Airlines operating revenue up 37%; pax yields strengthen 33%

China Airlines shares slipped 2.5% despite the carrier reporting a 37% jump in operating revenue in Sep-2010 to USD365 million, with passenger revenues up 36% to USD201.5 million, cargo revenues gaining 42% to USD148 million and "other" revenue strengthening 15% to USD16 million. Also in the month, passenger yield increased 33% to USD 7.84 cents with cargo yield also improved, by 25% to USD 28.18 cents. Traffic (RPKs) increased 2.4% with passenger load factors improving by 5.1 ppts to 80.8%.

Asia Pacific selected airlines daily share price movements (% change): 13-Oct-2010

Source: Centre for Asia Pacific Aviation, Reuters & Financial Times