Wed, Aug 31, 2005 - Page 11 News List

EVA profits hard hit by price of oil

EARNINGS SQUEEZED First-half net profits were down 54 percent compared with last year, which the company ascribes to fuel price increases

AP AND BLOOMBERG , TAIPEI

EVA Airways Corp (長榮航空) said yesterday that soaring oil prices hurt its first-half net profit, which fell 54 percent compared to the same period last year.

The nation's second-largest airline by revenue said its net profit for the period from January to the end of June was NT$589.4 million (US$18.06 million), down from NT$1.27 billion in the same period last year.

However, revenue for the first half increased to NT$41.17 billion from NT$38.07 billion for last year's first half.

The surge in oil prices offset the increase in revenue and weighed on the airline's earnings, said EVA spokesman Nieh Kuo-wei (聶國維).

"Fuel now accounts for over 30 percent of our operation cost, up from 20 percent two years ago," Nieh said.

Based on its first-half and first-quarter results, EVA Airways posted a net profit of NT$53.9 million in the second quarter, a tenth of the NT$521.3 million it reported in the year-earlier period.

The company expects revenue of NT$23.2 billion and pretax profit of NT$800 million in the third quarter, Nieh said.

Surging fuel prices are squeezing earnings of airlines worldwide, including EVA Airways and China Airlines (華航) and may cause the industry a record US$6 billion in losses this year, the International Air Transport Association said in May.

"Oil prices were the main reason" for the profit decline, Peter Tzeng, Polaris Securities Co's (寶來證券) Taipei-based analyst said. "Oil costs may continue to pressure them in the third quarter."

EVA Airways is hedging 40 percent of it fuel consumption this year, said Katherine Ko (柯文玲), public relations officer at the company.

The carrier imposes a US$13 per ticket fuel surcharge on such long-haul routes as the US and Europe and US$5 a ticket on short routes like flights to Hong Kong and Macau, she said.

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