By Myra P. Saefong
Iceland's volcanic eruption has rattled nerves across the
airlines and travel industries worldwide, but analysts say the
disruptions and delays caused by the natural disaster will likely
pose only a minor setback for Asian airlines.
"The volcanic ash has had a material impact on the near-term
earnings of the Asian/Australasian airlines, however we expect the
financial impact of this to be small overall," analysts at
Macquarie said in a recent note to clients.
"Most premium travel, which will be business related, may be
postponed till after the incident rather than totally cancelled,"
they said.
The Icelandic volcano crisis cost airlines more than $1.7
billion in lost revenue through Tuesday -- six days after the
initial eruption, according to a report from the International Air
Transport Association Wednesday.
"At the worst, the crisis impacted 29% of global aviation and
affected 1.2 million passengers a day," with the scale of the
crisis eclipsing the impact from the Sept. 11, 2001 terrorist
attacks in the U.S. when airspace was closed for three days,
Giovanni Bisignani, director general and CEO of IATA, said in a
statement.
Shares of most major airlines in Asia suffered declines
following the initial disruptions caused by the volcanic ash and
some have managed a modest recovery.
In late morning trading Thursday, shares of major airlines
traded mainly lower, in line with the region's benchmark indexes.
Shares of Qantas Airways (QUBSF) were down 0.3%, and Virgin Blue
Holdings (VBA.AU) shed 3.2% in Sydney, as the S&P/ASX 200 fell
1.2%.
All Nippon Airways Co. (ALNPF) fell 1% in Tokyo, and in Hong
Kong, Cathay Pacific Airways Ltd. (CPCAF) lost 1.6% and China
Eastern Airlines Corp. (CEA)(CEA) fell 2.1% but China Southern
Airlines Co. (ZNH) added 0.3%.
Shares of China Southern were also up 1.6% and China Eastern
Airlines Corp. rose 1.8% in Shanghai.
And in broader regional trading, China's Shanghai Composite
Index fell 1%, Hong Kong's Hang Seng Index shed 1.3% and Japan's
Nikkei 225 lost 1.9%. South Korea's Kospi slipped 0.9%.
Temporary setback
The volcano crisis had emerged as passenger demand worldwide was
on the increase.
International passenger demand was up 9.5% in February, compared
with a year earlier, IATA data released in late March showed.
Passenger demand at the time, according to Bisignani, was on track
to return to pre-recession traffic levels within two to three
months.
However, in a research note Tuesday, analysts at UOB Kay Hian
said they do not recommend buying airlines "until further clarity
emerges."
"If the situation persists beyond one week, we will look to
downgrade Singapore Airlines (SINGY) and Cathay Pacific," they
said.
But "different airlines have different exposure to Europe," they
said.
Chinese airlines will be the "least impacted in the near term,"
but "there is a risk that international capacity could be shifted
to domestic routes and this will further aggravate yields which
have declined in the face of competition from high-speed rail,"
analysts at Macquarie said.
They remain positive on the Asia/Australasian airline recovery.
"Though the volcanic ash is likely to have a material near-term
impact, we think that this will largely be gained back with a
subsequent surge in demand once the restrictions on air space are
once again resumed," they said.
Among the Australian airlines, only Qantas is exposed to the
recent disruptions, according to Ben Potter, a market strategist at
IG Markets in Melbourne.
Potter said there likely won't be any lasting short- or
long-term impacts on Qantas from a financial perspective.
In the short-term, he said, there are a few costs which Qantas
has had to pay for, such as accommodating the passengers. These
have been at approximately A$700,000 ($648,000) per day.
In total, the costs are between A$1.5 million and A$2 million
for each of the five days operations into Europe were affected, but
the costs won't have any impact on the company's earnings guidance,
Qantas said.
Even so, "there are going to be a lot of European-focused
airlines, which were already in weak financial position that are
going to suffer very badly from this natural disaster," Potter
said. "We may even see some unable to recover from these latest
problems."