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EVA Airways says oil prices may hurt profits

EVA Airways Corp (長榮), the nation's second-largest carrier, saw soaring global oil prices eat into its margins this year and its whole-year net income might fall short of NT$2 billion (US$60 million), compared with last year's NT$3.2 billion, a company official said yesterday.

"The unprecedented high oil prices have battered aviation operators and the tourism sector," said Eva Airways president Chang Kuo-wei (張國煒) yesterday after a press conference held to launch its co-brand platinum cards with Citibank Taiwan (花旗銀行).

Oil prices have accounted for 40 percent of its operation costs and eroded more than NT$3 billion in profits this year, Chang said.

record costs

China Airlines Ltd (華航) chairman Chiang Yao-chung (江耀宗) predic-ted in another conference yesterday that the global aviation industry will have to pay US$97 billion in fuel costs this year, a new record high, threatening operators' profits to move into the red.

EVA Airways' Chang said that global oil prices should have peaked and started to slide again as replaceable energy has been developed and oil demand has been contained. But how low prices can go remains to be seen, he said.

EVA Airways on Monday reported that its profits in the January to September period fell 48.7 percent from a year earlier to NT$1.37 billion, although sales in the same period rose 6.97 percent year-on-year to NT$64.29 billion.

shrinking profits

China Airlines' profits for the period shrank to NT$1.01 billion from NT$3.39 billion a year earlier. In the nine months under review, its sales rose 12.8 percent to NT$79.02 billion.

Looking ahead, Chang said that oil prices and the avian flu were two key variables that might affect the carrier's performance next year. Excluding these two factors, the company is expected to post NT$5 billion to NT$6 billion in profits next year after adding new air routes and disposing of old aircraft, he said.

New route

Stressing that the company's business operations will be focused on the profitable Northeast Asian and US routes on which passenger capacity continues to rise, he said that EVA Airways is slated to add a new route between Taipei and Japan's Nagoya next year, taking the number of cities in Northeast Asia it serves to a total of eight.

In the area of cargo transport, which takes up around 45 percent of its total operations, the company is expected to invest in a new cargo company to be set up by China's Shanghai Airlines (上海航空) next year. As Shanghai Airlines is soon to obtain the right to fly to the US, Chang said this would be beneficial for its investment interests.

As the world's seventh largest cargo carrier, EVA Airways sees rising cargo-carrying demand from Hong Kong and Macau. Demand on this route rose to 50 percent of its cargo operations this year, while demand from Taiwan has dwindled to less than 20 percent because of businesses migrating abroad.
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