Regional airline stocks continue to regain lost ground


  • Business
  • Thursday, 03 Apr 2003

BY JAGDEV SINGH SIDHU

AIRLINE stocks in the region continued to regain lost ground yesterday, even though the industry has yet to come out of what some argue are its toughest operating conditions. 

Already bogged down by the effects of high oil prices, regional airlines have been faced with reduced number of passengers as well, brought about by the war in Iraq. Now, apprehension to travel has been amplified by the fear of Severe Acute Respiratory Syndrome, the pneumonia-like disease has claimed more than 70 lives, mostly in the region. 

All these factors are expected to make a huge dent in the bottom lines of regional airline companies. 

Investors dumped a number of regional stocks last week as fears of the impact of not only the Iraq war but also SARS exacerbated the negative sentiment surrounding regional carriers. 

But despite news of more cases of SARS, the share prices of some major regional airlines rose substantially yesterday on hopes that advances made by coalition troops would bring a swift end to the conflict in Iraq. Analysts say the rebound could also be due to oversold conditions. 

Singapore Airlines rose 20 cents to S$9.05, Cathay Pacific jumped 25 cents to HK$9.90, Qantas was unchanged at A$3.06, and Malaysia Airlines surged 26 sen to RM3.40. 

Share prices of European airlines were up significantly in early trade on similar optimism of a quick end to the war. 

Apart from that, investors in Europe were also buoyed by cost-cutting measures taken by some of the continent's largest carriers, like KLM. 

In Asia, many airlines have resorted to cutting the number of flights in the region due to the SARS epidemic. 

Singapore Airlines said it would cut 125 flights per week in response to falling demand for air travel. 

KL International Airport (KLIA) has seen a 3% drop in daily arrivals since the war in Iraq and the outbreak of the deadly flu and Malaysia Airlines' passenger traffic to countries affected by SARS has dropped. 

“We are assessing the load factor now,'' said MAS senior general manager Dr Mohamadon Abdullah. 

He said the airline, which has two daily flights to Hong Kong, might halve the number of flights to the territory. 

Reduced air travel is ironically helping airlines control a significant element of their cost; the price of jet fuel is reported to be under pressure recently because of lower demand. 

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