Korean Air reports record profits; China Southern reports tenfold profitability increase

Shares in Korean Air closed 2.1% weaker yesterday after rising as much as 0.6% in a day when the major Asia Pacific listed carriers recorded share price reductions.

Korean Air’s share price fall occurred despite the carrier reporting a record and higher-than-expected quarterly profit of KRW358 billion (USD317 million), exceeding the previous record of KRW352 billion in 2Q2010 as the stronger local currency and economic growth spurred travel and cargo demand. 

Net profit more than doubled to KRW484 billion (USD516 million) in the three months to Sep-2010 as the strong Korean won helped reduce imported fuel costs and dollar-denominated debt and encouraged Koreans to travel overseas. Revenues strengthened 26% outpacing an 18% operating cost increase.

The carrier, which has seen steady profit and margin growth since 2Q2009, stated it expects the trend to continue in coming months as President Chi Chang Hoon forecast full-year freight volumes to surpass records set in 2007.

China Southern reports tenfold increase in 3Q profits  

Shares in China Southern shares slumped 6.6% to HKD5.52 in Hong Kong trading yesterday ahead of the carrier’s earnings announcement. The stock has more than doubled this year, compared with 80% gains for both Air China and China Eastern. In Shanghai, China Southern dropped 3.7% to CNY12.11. Of 25 analysts tracked by Bloomberg in the past 12 months, 14 recommended investors “buy” China Southern’s Hong Kong-listed stock, seven had “hold” ratings, while the remainder said “sell”.

China Southern stated third-quarter profit surged almost tenfold as air travel rebounded and the yuan strengthened. Net income increased 971% to USD455 million in the period on a 45% revenue gain. The carrier benefited from increased demand as the global economic revival and stronger currency spurred travel demand. The yuan appreciation also pared the value of the carrier’s dollar-denominated debt.

China Eastern and Air China expected to report gains

China Eastern Airlines and Air China are expected to post profitability gains when they report earnings today. Shares in China Eastern and Air Chian both declined 4.6% yesterday.

Thai Airways expected to report slump in 3Q

DBS Vickers Securities stated Thai Airways is expected to report a 90% plummet in net profits from 2Q2010 to THB154 million (USD5.1 million) in 3Q2010 on the back of foreign exchange losses and a THB445 million (USD14.8 million) write-off of spare parts and inventory.

In 3Q2010, the carrier reported a 0.8 ppt year-on-year increase in load factor to 74.7% while yield rose 5.3% to USD 6.67 cents. According to the securities house, 4Q2010 results for Thai Airways is expected to be better as the peak season in tourism commences. Tisco Securities forecast Thai Airways to return to operating profitability during the quarter with an operating profit of THB3,540 million (USD118.1 million), compared with an operating loss of THB1,250 million (USD41.7 million) in the previous corresponding period. Shares in Thai Airways remained unchanged yesterday.

Asia Pacific selected airlines daily share price movements (% change):  27-Oct-2010