China Airlines and EVA Air rally on Songshan-Haneda resumption; Skymark shares stronger

Asian stocks rose, paced by the Hang Seng Index’s largest gain in more than four months, as growth in Chinese manufacturing bolstered confidence in the global economy.

Shares of China Airlines and EVA Airways staged a rally in Monday trade with EVA Air trading up 7.0% and China Airlines 4.4% stronger, after direct services between Taipei International Airport - formerly known as Songshan Airport – and Tokyo Haneda resumed following a hiatus of 31 years.

China Airlines and EVA Air will provide 14 weekly services on the route. According to Hua Nan Securities, the resumption of the service is expected to boost the number of Japanese tourists to Taiwan by around 10% p/a.

Hua Nan Securities commented: "Without doubt, China Airlines and EVA Air are the two direct beneficiaries of the flight resumption. The strong buying seen this morning reflects investors' upbeat mood about the two carriers."

Taking the Songshan-Haneda flight resumption into account, Hua Nan Securities stated China Airlines is expected to post an earnings per share (EPS) of TWD2.79 (USD 9.16 cents) in 2010 and TWD3.07 (USD 10.1 cents) in 2011. This compares with a loss per share (LPS) of TWD0.83 recorded in 2009 when the global economic meltdown hit the airline business.

Hua Nan Securities forecast Eva Air will register a TWD4.84 (USD 15.9 cents) EPS for 2010 and TWD5.08 (USD 16.7 cents) for 2011, compared with an LPS of TWD0.96 in 2009. Hua Nan Securities issued a target price of TWD28 (USD 91.91 cents) for China Airlines and TWD38 (USD1.25) for EVA Air.

ANA pleads guilty in price fixing case  

Shares in All Nippon Airways, Asia’s largest listed carrier by sales, agreed to plead guilty and pay a USD73 million criminal fine related to “two separate conspiracies” to fix prices in the air transportation industry, according to the US Justice Department. The carrier’s stock slumped 3.9% to JPY293 yesterday. 

Skymark expects profit growth in FY2011

Also in Japan and shares in Skymark gained 5.7%. The carrier, upon the release of its financial results for the six months ended Sep-2010, stated it expects to report a 109% increase in net profit to USD68 million in FY2011, with a recurring profit of USD107 million (+194% year-on-year) and an operating profit of USD112 million (+190%) on revenues of USD698 million (+36%).

The carrier reported a net profit of USD34 million in the six months ended 30-Sep-2010 (+38.5%) with an operating profit of USD72.7 million (+168%) and a "recurring profit" of USD34 million (+38.5%) on revenues of USD329 million (+26.6%).

Asia Pacific selected airlines daily share price movements (% change):  01-Nov-2010