Asia Pac driving aviation recovery; China Southern expecting net profit improvement in 1H2010


IATA reported that the aviation industry "continues to recover faster than expected", driven by strong Asia Pacific demand. Asia Pacific carriers recorded the most significant demand improvement at 15.5% in Jun-2010, with China continuing to be the region's growth engine.

  • The aviation industry is recovering faster than expected, with strong demand in the Asia Pacific region.
  • China Eastern Airlines' stock rose due to strong near-term earnings momentum, driven by the Shanghai World Expo.
  • China Southern Airlines expects a significant increase in net profit for the first half of 2010.
  • Korean Air and EVA Air were downgraded due to concerns about a possible decline in the cargo market.
  • Asiana Airlines' shares weakened despite a positive performance in the overall market.
  • Overall, Asia Pacific airlines experienced mixed daily share price movements.

See related article: World airline passenger and freight traffic back above pre-recession peak; some "slowing" expected

China Eastern upgraded due to "strong" near-term earnings momentum; benefiting from Shanghai World Expo

China Eastern led the advances among the Chinese airline stocks yesterday, rising 5.0% in Hong Kong and 5.6% in Shanghai, for the highest close since 06-May-2010. The stock had its rating raised from "underweight" to "equal-weight" by Morgan Stanley, who commented that the company's near-term earnings momentum is "extremely strong," helped by a boost from the World Expo in Shanghai. The event has attracted record crowds in the commercial hub.

China Southern expecting "over 5000%" increase in net profit in 1H2010

Shares in Air China gained 0.4%, with China Southern Airlines gaining 2.5%. China Southern yesterday stated it expects to report a net profit increase of "over 5,000%" in 1H2010 (six months to Jun-2010) on a year-on-year basis. During 1H2009, the carrier reported a net profit of CNY38 million (USD5.6 million).

The carrier explained: "During the period, the demand for aviation and transportation services increased gradually as a result of rapid domestic economic rebound. The company actively boosted its revenue level by taking advantage of such improved market and achieved the steady growth of its operational efficiency. Further, the net profit attributable to the equity holders of the company for the first half of 2010 was substantially increased, due to the completion of the disposal of its equity interest in MTU Maintenance Zhuhai Co Ltd and a lower base figure for the corresponding period in 2009".

Korean Air and EVA Air downgraded on possible decline in cargo market

Meanwhile, shares in Korean Air and EVA Air fell 5.1% and 2.5% respectively yesterday, as BofA Merrill Lynch Global Research cut its rating for both carriers from "buy" to "underperform", citing a possible decline in the cargo market. Asiana Airlines' shares were also weaker yesterday, down 4.1%, despite the benchmark Kospi finishing 0.3% higher yesterday.

Asia Pacific selected airlines daily share price movements (% change): 28-Jul-2010

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