Profit forecasts for Asian airlines cut due to U.S.

Profit forecasts for Asian airlines cut due to U.S.

SINGAPORE (AFP): Global brokerage house Salomon Smith Barney
has slashed its profit forecasts for Asian airlines as much as 17
percent over the next two years as the U.S. economy lumbers to a
worse than expected slowdown.

Previous projections for 2001 for Hong Kong's Cathay Pacific
Airways, Singapore Airlines (SIA) and Thai Airways were cut by 16
percent, four percent and seven percent, respectively.

For the following year, the brokerage reduced its estimates
for Cathay Pacific by 16.7 percent, and 6.7 percent for SIA but
raised Thai Airways by four percent because of a strong tourism
industry.

The aviation report was released as the United States produced
further gloomy economic figures showing growth in the fourth-
quarter of 2000 at just 1.4 percent

"Due to the worse-than-expected US economic downturn, we have
lowered our 2001E earnings (forecast) for CX (Cathay), SIA and TG
(Thai Airways) by as much as 16 percent," Salomon Smith Barney
said.

The Singapore carrier is seen as the most attractive among
major Asian airlines, with 18 percent earnings growth projected
for the next two years, the report said.

SIA, which does not issue quarterly reports, said net profit
grew 93 percent to 1.141 billion Singapore dollars (670 million
US) in the first six months of its fiscal year ended September.

"With an experienced management team, a premier brand name and
services, and a healthy balance sheet, we believe SIA should be
able to weather the economic downturn.

"It is worth noting that SIA was able to generate earnings
even during the Asian economic crisis (in 1997 and 1998),"
Salomon Smith Barney said.

Despite the downward revision in earnings forecasts, margins
in Asia are expected to remain the highest in the world, it
added.

Air traffic demand should slow slightly this year "given its
direct relationship with gross domestic product," Salomon Smith
Barney said.

"However, we believe the economic slowdown will be contained
and a pick-up should be expected in 2002."

Salomon Smith Barney said that the timing of additional
aircraft deliveries was crucial to maintaining earnings momentum
under the dampened environment.

"Thus, having the flexibility to defer aircraft deliveries to
retire old aircraft may prove beneficial to the bottom line," it
said, adding that it viewed "positively" news that Cathay might
defer the delivery of some aircraft orders.