Asian carriers have bright prospects

Asian carriers have bright prospects

SINGAPORE (AFP): A substantial jump in interim profits of Singapore Airlines (SIA) and similar gains by other Asian carriers strongly reflects better times ahead for airlines in the region, financial analysts said yesterday.

"The bottomline is beginning to show that Asian carriers are riding out of turbulent weather," Jean-Loius Morisot, an Asian airline analyst with Paribas Capital Markets in Singapore said.

Morisot said SIA's nearly 18 percent rise in group net earnings as announced earlier yesterday reinforced the belief that a series of cost cutting measures and enhanced productivity coupled with improving load factors were giving Asian airlines a shot in the arm.

SIA said its higher group net profit to S$460.5 million (US$307 million) for the half-year to September 30 came on the back of an economic recovery in major industrialized countries and lower fuel costs.

Group net earnings had slipped 5.8 percent to S$801 million in the year ended March 31 due to lower yields mainly pressured by higher operating costs.

Morisot said Paribas Capital Markets, the securities arm of French bank Banque Paribas, had revised its 1995 earnings forecast for SIA by 4.5 percent upwards to S$977 million.

"SIA's interim results show tangible evidence of improving fundamentals for the airline," he said.

Half-year results of Cathay Pacific, and the full-year results of Air New Zealand and Qantas Airways, which include six months of 1994, all show substantial increases in profit, analysts said.

Morisot said the recession in the global airline industry had beefed up productivity and cost control among Asian airlines.

"The added boost are yields (net revenue per passenger), which are not falling as they used to, and traffic growth, which is coming on strongly," Morisot said.

Vasu Menon, research manager of Keppel Securities, said SIA's half-year earnings was above expectations but cautioned that the strong appreciation of the Singapore dollar could affect yield.

SIA's yield during the period fell 2.5 percent to 74.5 Singapore cents per load ton-kilometer due to appreciation of the Singapore dollar by 4.7 percent against a basket of major currencies, the airline said.