Source: The Standard Author: Mandy Lo 05/19/2009
Subject Concerned: Opinion Airlines
Airlines are likely to push promotions in the face of the threat of human swine flu, analysts said.
The virus is expected to have some impact on the number of people flying - already slumping because of the economic downturn - and airlines are expected to continue to cut fares in the coming months.
"Promotions are expected to continue, especially for routes which have excessive capacity, to capture the yield-driven demand," said Kelvin Lau at Daiwa Securities.
He expects Cathay Pacific Airways, Hong Kong's largest carrier, to see passenger yield decline by 15 percent this year owing to various promotions, compared to last year's 5.3 percent leap in yield.
"Yields remain under tremendous pressure due to aggressive competition and significantly fewer premium passengers taking our services," said Tom Owen, Cathay's general manager, revenue management, in a newsletter.
But Lau expects influence of swine flu on the aviation industry to be less fierce than the impact of SARS in 2003 which pulled passenger traffic down by 80 percent.
"Unless the death rate of infected cases surges and any travel restriction is imposed, I do not see any chance of passenger traffic falling 80 percent further from now," he said.
Cathay may fail to achieve a profit turnaround this year if the virus spreads further, despite its fuel hedging loss expected to be lower amid rising crude oil prices, said Allen Wong Kin-sing at Quam.
"We may wait until the first-half result to consider any revision of our forecast of HK$560 million net gain of Cathay this year, which may be altered if the situation deteriorates," said Wong.