SIA yields slump in 1Q2010, Cathay in turmoil, China Eastern not optimistic
Asian airline shares were mixed on Thursday (29-Jun-09), as Asian equity markets strengthened and fuel prices increased. Hainan Airlines led the gains yesterday, up 3.7%. Also stronger was Thai Airways, up 2.9%. Thai stated it has reduced non-fuel expenses by USD239.6 million in the first five months of 2009, as part of plans to reduce these expenses by USD321.1 million this year. Qantas and Japan Airlines shares were also up, by 0.9% and 0.6%, respectively.
- Hainan Airlines and Thai Airways experienced gains in their shares, while Qantas and Japan Airlines also saw slight increases.
- Singapore Airlines reported its first quarterly loss since 2003 due to the global economic downturn, Influenza A (H1N1) outbreak, and fuel hedging losses.
- Singapore Airlines faced significant yield reductions in both passenger and cargo operations, with a negative gap between load factor and actual load factor figures.
- Cathay Pacific CEO expressed caution about the airline's ability to recover from the economic crisis, citing a collapse in front-end and cargo revenues, low yields, volatile fuel prices, and the ongoing financial crisis.
- China Airlines and China Eastern Airlines experienced declines in their shares, with China Eastern Airlines expressing pessimism about profitability in 2009 and expecting a tough year for international operations in 2010.
- Domestic aviation fares in China declined by 20% in the first half of 2009, despite solid domestic growth.
Singapore Airlines, meanwhile, gained 1.4%, despite the carrier reporting its first quarterly loss since SARS in 2003 in 1Q2009/2010 (three months ended 30-Jun-09). SIA reported a USD221.7 million operating loss and USD213.3 million net loss in the period, due to the devastating combination of the global economic downturn, the outbreak of Influenza A (H1N1) and large fuel hedging losses.
The carrier also experienced concerning yield reductions in the quarter, with passenger yield down 17.7% and cargo yield slipping a massive 33%, for a combined yield reduction of 20.8% in the quarter. There was also a concerning 12.8 ppts negative gap between the carrier's combined load factor and actual load factor figures (with a 12.7 ppt gap for passenger services and a 17.0 ppt gap for cargo operations). Looking forward, Singapore Airlines stated that while air cargo has stabilised in recent months, the freight outlook remains "challenging" with yields expected to remain under pressure from excess capacity. The carrier added that if the current conditions continue, the carrier expects to make its first ever annual loss.
Cathay Pacific CEO, Tony Tyler, also expressed caution about the carrier's ability to recover from the current global economic crisis, stating the recovery will be long and challenging. Mr Tyler told The Australian he has "not seen the airline industry in such bad shape in the 30 years that I have been in the business". He added, "frankly, I doubt that it's ever been this bad. As an airline, we are suffering a toxic combination of a collapse in our front end and cargo revenues, skinny yields at the back of the plane, volatile fuel prices and an international financial crisis that shows no sign of ending".
Mr Tyler also stated he has not ruled out the possibility of a permanent structural change in cargo and premium travel demand.
Leading the decliners on Thursday was China Airlines, down 3.1%. China Eastern Airlines was also down, by 0.4%. According to Chairman, Liu Shaoyang, the carrier is not optimistic about profitability in 2009, stating, "data show there will still be difficulties in the operation". The carrier added that 2010 will be a "tough" year for its international operations, with the carrier now not expecting a recovery in international growth until 2011. Mr Liu added that while domestic growth is solid, it has come at the expense of yields, with domestic aviation fares declining 20% in 1H2009.
Asia Pacific selected airlines daily share price movements (% change): 30-Jul-09
