Source: Bloomberg News Author: Veronica Navarro Espinosa, John Liu 04/20/2009
Subject Concerned: Opinion Airlines
China Southern Airlines Co., the country's biggest carrier, rose to the highest in eight months in New York trading after state-run China Central Television (CCTV) reported the nation's airlines will raise domestic ticket prices from Apr. 20.
China Southern's American depositary receipts climbed 9.2 percent to US$12.76, the highest since August. China Eastern Airlines Corp., the third-largest carrier, advanced the most in almost four months, gaining 14 percent to US$18.20.
Domestic ticket prices will increase by an average 20 percent and airlines will offer fewer discounts under a new ticket-pricing system, CCTV said on Apr. 19.
"Under the new ticket pricing system all of the Chinese airlines should see some benefits," Jim Wong, a Hong Kong-based analyst for Nomura Holdings Inc., wrote in a report. China Southern, with 80 percent of its revenue coming from domestic routes, is "the biggest potential beneficiary," Wong wrote.
China Southern's revenue may rise 600 million yuan (US$87.8 million) for every 1.5 percent increase in ticket prices, Wong said, citing estimates by the airline's management.
China Southern and China Eastern last week reported record losses in 2008 after natural disasters and economic slowdown curbed air-travel demand.
The country's gross domestic product expanded 6.1 percent in the first quarter from a year earlier, the slowest pace in almost 10 years.