By Myra P. Saefong
International passenger traffic has climbed over the past few
months, and analysts say Asia's airlines are likely on a fast track
to recovery as fare prices edge higher and as China readies for a
spike in tourism fueled by the Shanghai World Expo.
"Positive traffic growth has now been recorded for the past five
months, and although traffic levels still have further to go to
reach 2008 highs, the rate of growth is accelerating," Mark
Williams and Michael Newbold, analysts at the Royal Bank of
Scotland, wrote in a recent research note.
January global passenger demand was up 6.4%, with the
Asia-Pacific region experiencing a 6.5% rise, according to data
from the International Air Transport Association.
Similarly, international passenger traffic was up 8.6% from its
low in February 2009, with 31% of that improvement realized by
carriers in the Asia-Pacific region, IATA said.
Asia's strength reflects the region's "faster economic recovery
compared with the rest of the world," Williams and Newbold
said.
That's a "good sign" for the international operations of
Australia's Qantas Airways Ltd. and Virgin Blue Holdings Ltd.,
which will likely see "solid growth" in the calendar year 2010,
they said.
In Asia's afternoon trading Wednesday, shares of the region's
major airlines were mixed. Shares of Qantas Airways (QUBSF) were up
1.1%, and Virgin Blue Holdings (VBA.AU) added 0.7% in Sydney, even
as the S&P/ASX 200, the broader benchmark index, fell 0.2%.
But All Nippon Airways Co. (ALNPF) fell 0.4% in Tokyo, and in
Hong Kong, Cathay Pacific Airways Ltd. (CPCAF) added 1.4% ahead of
its full year 2009 results due after the market close.
Also in Hong Kong, China Southern Airlines Co. (ZNH) added 3.5%,
but China Eastern Airlines Corp. (CEA)(CEA) fell 0.4%. In Shanghai,
shares of China Southern were 1.9% lower, and China Eastern fell
2.3%.
Most benchmarks in the region traded lower. China's Shanghai
Composite Index, Hong Kong's Hang Seng Index and Japan's Nikkei 225
each lost 0.1%. South Korea's Kospi slipped 0.3%.
Fare and freight
Growth in international passenger traffic is set to combine with
rising air fares and a rebound in air-freight demand to further
fuel recovery expectations for Asia's airlines.
"With growth in the Asia-Pacific region strong, we expect local
airlines to outperform," Williams and Newbold said, as they
retained their buy ratings on Qantas and Virgin Blue.
Air-fare prices are also on a "recovery path," they said,
pointing out that IATA statistics suggest that the average economy
fares are up 10% on lows witnessed in mid-2009, while premium fares
have also seen "significant recovery."
And in 2009, intra-Asia-Pacific travel eclipsed the number of
travelers in North America as the world's largest aviation market,
according to IATA.
Asia-Pacific travelers numbered 647 million that year, compared
with 638 million travelers within North America, IATA said. By
2013, an additional 217 million travelers are expected to take to
the skies within the region.
Air freight has been recovering as well. International cargo
demand showed a 28.3% improvement in January, and air-freight
volumes were up 3%, according to the IATA.
"Demand is moving in the right direction," the group, which
represents the airlines industry, said in a press release this
month.
"Air freight is a forward indicator of economic activity, and
the sheer strength of this number gives us confidence in the
strength of the global economy recovery," Williams and Newbold
said.
China lift
At the same time, air traffic in China is poised to particular
improve.
Citigroup forecasts an 18% air-travel growth in 2010 for
airlines in mainland China, and that may drive record profits,
according to Citigroup analysts Ally Ma and Brian Lam.
"The forecast is underpinned by 14% Chinese air-passenger growth
in the first two months [of the year], and we expect the travel
momentum to strengthen during the six-month Expo," they said in a
note to clients.
The Shanghai World Expo runs from May 1 to Oct. 31 and, with a
theme on urban living, is expected to attract about 70 million
visitors.
Ma and Lam said they "conservatively" expect 7 million air
travelers for the Expo, though they point out that China Eastern
Airlines forecasts 11 million to 16 million "Expo-triggered" air
travelers.
Chinese airlines are also "desperately elevating their
competitiveness through balance-sheet restoration, strategic
re-positioning, network optimization [and] operating efficiency
improvement," Ma and Lam said.
Moreover, they're "proactively seeking domestic consolidation
opportunities and embracing global airline alliances to strengthen
international legs."
"As such, the [mainland Chinese airlines] sector looks
interesting with many positive features," they said.