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Qantas slips on news of yield and profitability weakness; Japan Airlines, Singapore Airlines down

The majority of Asia Pacific share prices slipped yesterday (08-Jul-09), with India’s SpiceJet and Kingfisher leading the pack, falling 6.3% and 5.8%, respectively. Singapore Airlines and Cathay Pacific shares were also down, by 0.5% and 0.4%, respectively.

Qantas also slipped, down 2.4%, following yesterday’s profit and share target price downgrade by RBS. RBS stated it expects Qantas’ FY2009-10 pre tax profit to fall by almost 40% to AUD172 million, due to the devastating combination of a weak pricing and demand environment and generally increasing oil prices, and forecast yield to continue to weaken in FY2010, falling 2.4% domestically and 9% on international services. This prediction of yield weakness was supported by comments by Qantas Chairman, Leigh Clifford, who stated the carrier has suffered a “significant contract in premium travel", which is down by 30% on some routes.

The carrier is considering further capacity cuts, and previously expected a 5% reduction in traffic in the 12 months ended 30-Jun-2010.

Qantas is also facing new and fierce competition on its previously highly profitable trans-Pacific services, following the launch of V Australia and Delta Air Lines trans-Pacific services (who are now seeking regulatory approval to form a JV that will "expand both carriers' reach between the US and Australia and the South Pacific").

Elsewhere, Hainan Airlines' shares gained the most yesterday, as it reported a 31.5% passenger increase in Jun-2009 to 1.5 million, with load factor slipping 0.7 ppts to 74.6%.

Asia Pacific selected airlines daily share price movements (% change): 08-Jul-09