5.3 million pax of China Golden Week Holiday, Korean Air expects 3Q2009 profitability

China's Shanghai Composite Index closed up 4.8% on Friday, its third-biggest daily gain of 2009, following a strong global rally during the country's eight-day National Day holiday.

The CAAC reported that Chinese carrier transported 5.3 million passengers during the ‘Golden Week’ holiday in China (between 28-Sep-2009 and 08-Oct-2009), a 22% year-on-year increase (although this included one extra day from 2008). Load factors averaged 72.5% in the period, a 1.5 ppt reduction.

China Southern Airlines reported an 11% increase in passenger numbers in Sep-2009. Cargo volumes were up by a greater rate (+25%), due to double-digit domestic growth, while passenger load factors slipped 4.0 ppts to 72.6%.

On Friday, shares in Hainan Airlines, China Eastern, Air China and China Southern all gained, rising 4.7%, 2.4%, 0.4% and 0.4%, respectively. Shanghai Airlines’ shares remained unchanged, while in Hong Kong, Cathay Pacific’s shares were up 3.5%, for the fourth consecutive day, as the market continues to react positively to news that load factors are improving.

China Eastern and Shanghai Airlines one step closer to joint restructure with shareholder approvals

Meanwhile, China Eastern Airlines and Shanghai Airlines shareholders approved the first joint restructuring plan involving two listed companies in China's civil aviation history on 09-Oct-2009. The approval marks the completion of all internal legal proceedings related to the joint restructuring, with the plan now awaiting approval from the China Securities Regulatory Commission (CSRC).  

In other positive news for the Chinese airlines, China’s National Development and Reform Commission stated it would reduce the price of aviation fuel from 11-Oct-2009, although no details on the scale of the reductions were provided.

Korean Air expects 3Q2009 profitability, but facing pressure from LCCs in the domestic market

Also in North Asia, Korean Air’s shares gained 1.3% on Friday, as the carrier stated it expects to report an operating profit of USD163.3 million in 3Q2009. Also during the quarter, the carrier handled 3.7 million international passengers, a 8% year-on-year gain, with cargo volume also up in the quarter (+2% to 253,700 tonnes).

However, domestically the carrier is facing greater competition from the country’s four major LCCs - Jin Air, Air Busan, Jeu Air and Eastar Jet – who had a combined domestic market share of 31.1% in 3Q2009, up from 9.7% in 3Q2008 and from 20.8% and 25.8%, in 1Q2009 and 2Q2009, respectively.

Qantas expecting business demand to eventually return

Qantas' shares were up 2.4% on Friday. CEO, Alan Joyce, stated he expects premium demand to eventually return, stating, “the business market will return, and when it does return you could easily see in a couple of years' time the bulk of our profitability being made through the Qantas brands again…I think [the Business market] does have a life, and after the end of every recession people have called the market as being dead and it's never been the case”.

Fuel reprise for Indian carriers?

In India, Kingfisher’s shares slipped 3.4%, while Jet Airways and SpiceJet rose 1.0% and 1.6%, respectively, for gains of 23%, 66% and 44% over the past month.

In a positive development for the carriers, India’s Finance Ministry is reportedly in favour of a proposal to allow the import of aviation turbine fuel (ATF) under open general licence. If accepted, the recommendation would provide respite to airline companies, as it would reduce the price of ATF, which constitutes 40-45% of the airlines’ operating costs. 

Asia Pacific selected airlines daily share price movements (% change): 11-Oct-09