Carriers are especially nervous about fuel prices and the fact that many intra-Asian markets remain poor. And while airlines have now cut capacity and shifted focus to more profitable European and US routes, maintaining yields in some of those markets has also become problematic.
Yet the slow return to profitability appears to have begun. Airlines in China have fared especially well, with the Hong Kong- and New York-listed carriers China Southern and China Eastern both posting first-half returns to profitability. They cite internal cost-cutting efforts and improving market conditions as well as government efforts to control growth.
Improvements are also evident in South Korea. Privately held Asiana says its financial position - a disaster in 1997 and 1998 - is healthier and the airline is planning a listing on the secondary Kosdaq market by December. Korean Air also reports rising passenger and cargo loads. Consequently, Korean's first-half net profit owes more to operational gains than to asset/aircraft sales, which propped up its bottom line last year.
In Hong Kong, the mood is more buoyant than it has been in a long time. For the first time since the fall, Cathay Pacific reported a return to profitability in its first half to June. The airline says the regional market is improving and the carrier may, as a result, examine new aircraft orders earlier than anticipated. But Cathay's management adds that full recovery may be some way off and points out that average fares remain weak.
Regional carrier Dragonair is suffering and analysts say it is primarily because the airline has not cut costs as quickly as other airlines in the region. Even financially healthy Singapore Airlines forecasts uncertainty in the year ahead and the carrier expects to see little joy from yields, particularly within Asia.
In Taiwan, EVA Air and China Airlines have each posted healthy first-half profits and say the market looks bright for the second half. Thai Airways too is benefiting from big foreign currency gains. It posted net profits of 11 billion baht($280 million) for the first nine months of its financial year which runs to September. Even Philippine Airlines claims to have shown profits in the first quarter, although the hike in fuel prices is causing grave problems.
There is lingering caution too in Australasia, despite a solid set of profit increases from the three big players as they unveiled their 1998/9 annual results. A 38% surge in net profits at Qantas Airways is described as "an unequivocal stunner" by one analyst, but even there chief executive James Strong, one of the few executives in the region who might feel tempted to crow, instead captures the general mood by pointing out that he sees no general resumption of Asian services and no prospect of an overnight recovery.
Most notably cautious is Japan, where the restructuring goes on as the majors attempt to climb back from last year's dip into red ink. The majors have yet to report on their first half performance, but like elsewhere in Asia the struggle is clearly not quite over yet.
Source: Airline Business
