Chinese carriers benefit from reduced fuel prices and further cash injections

Asian airline shares were generally higher on Tuesday (28-Jun-09), reflecting stronger conditions on Asian equity markets and lower fuel prices. The Chinese carriers were, again, the strongest gainers yesterday, with China Southern and China Eastern soaring 11.2% and 10.0%, respectively, following gains of 8.0% and 7.3% on Monday, as the Shanghai Stock Market increased its winning streak to five sessions, gaining 6.3% to a new 14-month closing high. Air China and Cathay Pacific gained 5.0% and 3.0%, respectively.

Further stocking Chinese airline stocks, reports have emerged that China’s Assets Supervision and Administration Commission has convened a meeting to discuss a possible further cash injection of CNY3.1 billion (USD454 million) into China’s three largest carriers.  China’s National Development and Reform Commission, meanwhile, will reduce the price of jet fuel by 5.5% to CNY4.770/ton, effective today.

Elsewhere, Thai Airways' shares climbed 4.6%, and hit the highest level since 10-Jul-09 during the day’s trading, amid expectations that the airline would report a net profit for 2009, after a net loss in 2008, due to lower jet fuel costs and cost cuts.

Leading the decliners on Tuesday was Jazeera Airways, down 3.6%, Japan Airlines (-1.8%) and Singapore Airlines (-0.6%). Malaysia Airlines shares remained stable on Tuesday, despite news that the carrier’s passenger traffic has returned to pre-global financial downturn levels. Load factors increased to 67% in Jun-2009 and 76% in Jul-2009, after dropping to 56% in 1Q2009. The carrier attributed the increase in traffic to its various initiatives, including its “Everyday Low Fares” programme.

Asia Pacific selected airlines daily share price movements (% change): 28-Jul-09