Deutsche Bank AG cut its ratings on Cathay Pacific Airways Ltd, Korean Air Lines Co and other carriers in Asia excluding Japan, citing higher jet fuel prices.
The bank lowered its rating on Asian airlines to "underweight" from "neutral" after it raised its forecasts for jet fuel prices for this year and next, Deutsche Bank's Hong Kong-based analysts, Nam Nguyen, Stacy Shi and Sam Lee, wrote in a report yesterday. They forecast earnings in the industry to fall 25 percent this year.
Situation changed
"Unlike last year, when it was easier to push through the additional cost increases, airlines this year will unlikely be able to pass on as much of the jet fuel price increase," the report said. The price of jet kerosene, which typically makes up 15 to 20 percent of an airline's operating costs, has risen more than expected this year, they said.
Deutsche Bank cut its rating on Cathay Pacific, Asia's second-biggest carrier by market value, to "sell" from "buy."
EVA reduced
Deutsche Bank lowered its recommendations for Korean Air and China Airlines (
The bank also cut its rating on EVA Airways Corp (
Airlines globally may pay US$76 billion for fuel this year, one-fifth more than they paid last year, according to the International Air Transport Association.
Bigger losses
The surge in fuel costs may lead to combined industry losses of US$5.5 billion this year, the association, which has about 270 members, said last month.
The price of jet kerosene traded in Singapore has increased 35 percent this year, reaching a record US$76.38 on April 4. It fell 2.1 percent on Monday to US$65.38 a barrel, according to oil-pricing service Platts.
Deutsche Bank raised its forecasts for jet fuel prices to US$60 a barrel this year from US$47.50, and to US$55 a barrel next year from US$41.
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