Source: Bloomberg News Author: Irene Shen 07/01/2008
Subject Concerned: Opinion Airlines Aviation Fuel
Air China Ltd., the country's largest international carrier, lost its position as the world's most valuable airline to Singapore Airlines Ltd. after its shares dropped 67 percent this year.
Air China fell 2 percent to HK$3.84 in Hong Kong, giving it a market value of US$11.4 billion. That lagged behind Singapore Air's US$12.8 billion.
Chinese carriers including Air China have outpaced a 49 percent decline in the nation's CSI 300 index as jet-fuel prices rise and fewer people fly. Airline shares will continue to suffer, said Li Lei, an analyst at China Securities Co. in Beijing.
"Air China is falling back to a fair value and fair position," said Li. "Airlines, which are more volatile when fuel prices surge, are not favored by investors."
Singapore Air lost its top spot to Air China about a year ago, according to Bloomberg data. The Beijing-based carrier is valued at 9.5 times its 2007 earnings, compared with 8.5 times for Singapore Air.
Singapore Air declined 0.7 percent to S$14.60 in Singapore. The shares have dropped 16 percent this year.
Falling Traffic
China raised jet fuel prices for domestic routes 25 percent on June 20, adding about 15 billion yuan to airlines' annual operating costs. The international jet fuel price has doubled in the past year, falling 0.2 percent in Singapore to US$171.05 a barrel on June 30.
Chinese airlines raised ticket surcharges by as much as 50 percent starting July 1 to cover costs and have cut flights to reduce fuel usage.
"There won't be any good news to boost airlines' share prices at least before the Olympic Games," said Li. "Surging jet fuel is making all airlines' operations difficult."
Chinese air-travel demand slowed in the first five months, hampered by the country's worst snowstorms in five decades and its most powerful earthquake in 58 years.
Air China's passenger numbers plunged 11 percent last month. China Eastern Airlines Corp., the country's third-largest carrier, posted an 8.1 percent decline in passenger numbers in May, while China Southern Airlines Co., the nation's biggest carrier, said passenger numbers were little changed.
China's CSI 300 Index is the second-worst performer among 90 primary stock indexes tracked by Bloomberg, trailing only Vietnam.