Thai Airways jumps, JAL, Singapore Airlines and Cathay Pacific up, China Airlines' yields tumble

Asian airline shares were mixed again on Friday (19-Jun-09), despite an overall improvement in Asia Pacific markets. Air Arabia, Korean Air, Air New Zealand and China Airlines all declined, by -5.0%, -4.6%, -4.3% and -4.1%, respectively. China Airlines' investors reacted to its May-2009 traffic statistics showing a 12.2% year-on-year reduction in passenger yield and a 5.0% reduction in passenger numbers. Cargo traffic slipped 24.7% in the month and cargo yields fell a jaw dropping 30%.

If China Airlines' cargo yield is any testament to underlying global economic conditions, the outlook is very weak indeed.

China Airlines passenger yield growth vs freight yield growth: Jun-2008 to May-2009

Cash to burn: Thai and JAL receive a boost

Thai Airways and Japan Airlines reported the highest share price improvements on Friday, of 8.7% and 3.9%, respectively.

Investors in particular responded positively to a decision by Thai Airways' Board of Directors to approve USD671.4 million in five-year loans from Thai banks to restructure short term debt and improve liquidity. The carrier also plans to seek USD408.4 million in foreign loans to fund its order for eight A330 aircraft.

JAL Group also announced further details of its medium term corporate plan, which the carrier stated would see a “drastic reformation to its business model and processes” from the period commencing FY2009 (01-Apr-09 to 31-Mar-10). As part of the new plan, the carrier plans to reassess its network based on "more conservative projection" of demands and profitability, with the carrier’s cargo business to undergo “drastic changes”. The airline will also enact additional cost reduction measures, reduce its overall fleet size and composition and re-evaluate the management structure of its subsidiary airlines.

The plan is a prerequisite for Government-mandated aid, with the Japanese Government reportedly considering guaranteeing approximately 80% of JAL’s JPY100 billion (USD1.0 billion) syndicated loan currently being determined by the state-backed Development Bank of Japan and three major private-sector banks.

Elsewhere, shares in Singapore Airlines and Cathay Pacific rose 2.4% and 1.5%, respectively, while Qantas dropped back 1.9%.

Asia Pacific selected airlines daily share price movements (% change): 19-Jun-09