EVA Air sticks to profit forecast as oil price increases

EVA Airways Corp (長榮航空), the nation's second-largest carrier, said it may raise prices to reflect rising oil prices, allowing the company to stick to its goal to more than double profit amid strong demand for passenger and cargo space.

EVA Airways is "confident" of reaching its NT$2.8 billion (US$81 million) profit target this year, more than double last year's NT$1.2 billion, spokesman Nieh Kuo-wei (聶國維) said in a phone interview.

Asian stocks slumped after oil prices extended a 21-year high, threatening to slow global economic growth. New York crude oil futures extended last week's record after Qatar-based al-Jazeera television station said Izzeddine Salim, head of the Iraqi Governing Council, was killed by a bomb in Baghdad. Crude for June delivery climbed as high as US$41.75 in after-hours trading on the New York Mercantile Exchange.

"For the moment, we see no signs that oil price increases will slow global economic growth, especially because both the shipping and air cargo industry will enter the annual peak season from June to September," Nieh said.

The cargo industry has leeway to levy a fuel surcharge to absorb oil price increases and passenger airfares can be raised to lessen the impact of higher oil costs for carriers, Nieh said.

The stock market's tumble today wasn't "reasonable" and the falling share prices for Taiwanese shippers are "hard to imagine," he said.

Shares of EVA Airways have fallen 26 percent in the past three months, compared with a 16 percent decline by the TAIEX. Evergreen Marine Corp (長榮海運), which owns about a quarter of EVA Airways, fell 33 percent in the same period.

"Investors simply had overreacted to oil price increases," he said. Oil prices "are in an uptrend in the long run because of widening shortage of crude oil, but recent price gains should be enough in the near term."