Indian carriers gain on fuel reduction and loan ruling; Hainan Airlines shareholder reduces stake


Global stocks surged the most since May-2010 as manufacturing in the US and China grew faster than economists estimated, bolstering optimism in the economy. Shares in the Australian market were also boosted by strong economic data as GDP grew strongly in 2Q2010.

  • Global stocks surge on better-than-expected manufacturing data from the US and China.
  • Virgin Blue shares rise 11.6% as investors support CEO's strategy to compete with Qantas.
  • Kingfisher Airlines plans to raise over USD350 million in funding, leading to a 5.1% increase in shares.
  • Reserve Bank of India eases loan restructuring rules for debt-laden airlines, benefiting Indian carrier stocks.
  • Hainan Airlines shares decline as a major shareholder sells 2.2% of the carrier's total share capital.
  • Air China shares gain 2.9% after signing a supplementary agreement with Boeing to acquire 15 B787-9 aircraft.

Shares in Virgin Blue surged 11.6% yesterday, with investors appearing to back CEO John Borghetti's aggressive strategy to lure a greater share of the business market from Qantas, as well as its recent network overhaul which culminated in the removal of a number of loss-making routes. Shares in Qantas were up 2.0%.

Shares in Kingfisher Airlines also gained yesterday (+5.1%) as the carrier announced plans to raise more than USD350 million in funding, through a combination of global depository receipts and a local equity offering.

The carrier also benefited from news that the Reserve Bank of India (RBI) has agreed to ease rules for the restructuring of loans for the nation's debt-laden airlines. Banks will now be permitted to restructure unsecured aviation loans without classifying them as non-performing assets.

Also positively effecting Indian carrier stocks was news that India's aviation turbine fuel (ATF) rates have been reduced by 4%, the first reduction in rates since Jul-2010 following a softening of international oil prices. Shares in SpiceJet increased 3.4%, with Jet Airways shares 0.5% higher.

For more information see related article: Reserve Banks enables banks to restructure aviation loans; Kingfisher seeks to raise USD350m

Hainan Airlines shareholder sells 90 million shares

At the other end of the spectrum, shares in Hainan Airlines slipped 3.5% yesterday, following a 3.3% decline the previous day, on news that Hainan Industrial Holdings, the carrier's seventh-largest shareholder, sold 90 million shares in the carrier (equating to 2.2% of the carrier's total share capital) on the Shanghai Stock Exchange. Hainan Airlines Industrial Holdings now has 181,000 shares, less than 0.1%, in Hainan Airlines.

Air China shares, meanwhile, gained 2.9%, following the previous day's 1.8% decline. The carrier earlier this week entered into a supplementary agreement with Boeing to acquire 15 B787-9 aircraft. The company in 2005 was approved to purchase 15 B787-8 aircraft.

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

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