Asian carriers reporting full-year or quarterly results to March generally beat expectations as the travel market continues to recover at a faster rate than had been thought, and sentiment is improving about prospects for 2002, writes Nicholas Ionides.
Although Asian carriers were not as badly affected by the industry downturn that followed the September terrorist attacks as their counterparts in the USA and Europe, they did feel pain and saw demand drop sharply in the last quarter of 2001.
But conditions have been improving steadily and while no carrier is yet ready to categorically say the worst is over, many are privately saying they feel the recovery since January is more than just a temporary upswing.
In Japan, the three majors - All Nippon Airways (ANA), Japan Airlines (JAL) and Japan Air System (JAS) - posted losses or substantially reduced profits for the year to March, but all expect to be in the black this financial year. ANA saw operating profits plunge for the year and it fell into the red on a net basis. It expects conditions to improve this year, however, as it continues restructuring to allow it to better compete with JAL and JAS, which plan to merge. ANA forecasts a modest net profit this year of ´2 billion ($16 million).
JAL also reported a net loss for 2001-02, but it expects to return to profitability this year with a net gain of ´23 billion. Its loss last year was also far smaller than expected. JAS, meanwhile, reported a 58% drop in net profit, but unlike ANA and JAL it managed to stay in the black. It also sees conditions improving.
A similar story has been seen in South Korea. Korean Air (KAL), which early this year said it was aiming for a profit of $77 million for 2002, made an operating profit of 72.2 billion won ($59 million) during the first quarter ended 31 March, reversing last year's operating loss during the same period. It expects to benefit this year from traffic growth as the market recovers and because of the football World Cup, held in South Korea and Japan in June. In addition, KAL expects business to grow following the recent reinstatement of codeshare ties with Delta Air Lines and Air France.
Home-based rival Asiana Airlines also returned to profitability in the first quarter on the back of improving market conditions. Like KAL it suffered badly in 2001 from a sharp drop in demand, rising costs and a weak local currency.
Taiwan growth
In Taiwan, EVA Air says it expects to return to profitability this year with an expected net gain of NT$1.25 billion ($36 million) as its financial performance improves on the back of a recovery. China Airlines (CAL) is also forecasting steady growth, despite a late-May Boeing 747-200 crash that killed 225 people. The airline initially said it expected its pre-tax profit forecast of NT$1.41 billion to be missed by around 10% for the full year, although it later reinstated its earlier forecast after reporting a 71% leap in pre-tax profit for the first five months of this calendar year.
In China, meanwhile, airlines continue to see traffic growth well above the world average and majors China Eastern and China Southern both remained in the black last year. China Eastern is also back to profitability for the March quarter, saying demand is strengthening and costs are being reduced. The Chinese domestic market continues to grow at phenomenal rates. China Southern, for example, saw revenue passenger kilometres jump 15.6% last year. It carried 13.5% more passengers, while the amount of cargo carried increased 12.7%.
Philippine Airlines suffered full-year losses, but it expects to return to profitability this year as market conditions improve. The September attacks had a damaging effect on its business although its financial state began to improve again in December.
Thai Airways International managed to return to profitability in its first half year to 31 March, 2002, largely on the back of foreign currency gains and lower costs. It was hit during its first quarter by the negative effects of the September attacks as well as from higher overhaul and maintenance costs. But apart from foreign currency gains, it benefited from lower fuel, aircraft lease and interest charges.
Recovery plans
Elsewhere in South-East Asia, Malaysia Airlines (MAS) reported its fifth consecutive year in the red for 2001-02. The heavily indebted carrier saw group net loss double, although it was less than expected and the carrier says its recovery plans are taking shape.
Singapore Airlines (SIA), meanwhile, reported a far better-than-expected 2001 result. Group operating profit fell 27% while net profit plunged 61%, but it maintained its unbroken profit record.
"Although the current operating environment remains uncertain, recovery in the global economy, led by the USA, which is slowly emerging from a downturn, is expected to take place later in the calendar year," it said in its earnings report. "This should lead to a steady recovery of business travel." Summing up the general mood in the region, SIA added: "Overall, we expect a better year in 2002-03 than the one just ended."
Source: Airline Business
