Thai Airways first quarter net profit halved, SIA and Cathay report good forward bookings

Thai Airways reported a 48% reduction in net profit and a 23% fall in operating profit in the three months ended 31-Mar-08, as higher fuel costs (+40% year-on-year) and currency losses offset double-digit growth in revenue, buoyant demand and higher load factors. Almost half of Thai Airways’ debt is euro denominated, which appreciated by 14% against the Thai baht in the first quarter.

The outlook for Thai, which raised fuel surcharges as much as 35% in late Apr-08, is challenging. The carrier recently signaled its widebody fleet order may be reconsidered and even downsized, as part of renewed cost-cutting efforts.

Meanwhile, Singapore Airlines stated forward bookings are still firm, despite rising economic uncertainty, although it sees some softening for discretionary travel out of the US, but not for the corporate sector “as yet”.

Cathay Pacific meanwhile stated forward bookings for the peak Summer months of July and August “remain within expectations”. This time last month, Cathay stated “we have added a lot of capacity on key long-haul routes in recent months, but so far passenger growth has managed to keep pace. Overall, the situation looks promising through to the start of the Summer peak.”

However, passenger demand failed to keep up with Cathay's 14.3% increase in capacity in Apr-08, leading to a 1.0 ppt fall in load factor to 79.4% – the first monthly decrease since Jun-07. Cathay said the early Easter this year skewed year-on-year comparisons.

Cathay's cargo segment meanwhile is suffering badly. In its March traffic commentary last month, the airline said fuel prices were “having a big impact” on the bottom line of its freight business. This month, the carrier stated fuel is “inflicting serious damage”, while it warned of increasing competition from ocean cargo in May and June, which are "traditionally slack months for cargo out of Asia”.

Nevertheless, Cathay continues to accelerate cargo capacity growth, with a 12.9% increase in FTKs in Apr-08 taking the year-to-date increase to 10.5% year-on-year.

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