Source: Bloomberg News Author: Wendy Leung 06/27/2008
Subject Concerned: Government Opinion Airlines Cargo Aviation Fuel
Cathay Pacific Airways Ltd., Hong Kong's largest airline, fell on the city's stock market after oil prices hit a record and the carrier agreed to pay a fine to settle a U.S. air-cargo price-fixing probe.
The airline dropped 1.7 percent to HK$14.78 at the close. China Southern Airlines Co., the nation's biggest carrier, fell 5.1 percent to HK$3.18. Korean Air Lines Co., South Korea's largest airline, slipped 4.3 percent to 50,900 won in Seoul.
Carriers across Asia fell after crude oil climbed to a high of US$140.39 a barrel on June 26, raising the price of jet fuel, most regional carriers' biggest expense.
Cathay Pacific also agreed to pay a US$60 million fine to resolve a U.S. Department of Justice investigation, joining other airlines including Air France-KLM Group and British Airways Plc.
"Airlines' earnings aren't expected to do very well this year because of fuel prices," said Jim Wong, an analyst at Nomura International in Hong Kong.
The price of jet fuel has almost doubled in the past year, forcing Korean Air, China Southern and other Asia-Pacific airlines to cut capacity and raise surcharges to help cover costs.
Air China Ltd., the nation's second-biggest carrier, slipped 5.8 percent to HK$3.92 in Hong Kong trading. China Eastern Airlines Corp., ranked third, declined 3.5 percent to HK$2.47.
Cathay Pacific has fallen 28 percent this year, compared with a 21 percent loss for the city's benchmark Hang Seng Index. The Bloomberg Asia Pacific Airlines Index, comprising 17 airline stocks, has plunged 45 percent.