Wed, Aug 22, 2007 - Page 12 News List

China Airlines warns of losses after disaster

TOUGH TIMES AHEAD The domestic carrier said that its cash flow would be affected by the loss of one aircraft and bookings may fall before public confidence is restored


China Airlines Ltd (中華航空), the nation's largest carrier, is bracing for a financial loss after fire consumed a Boeing 737-800 passenger jet shortly after it landed at Naha Airport in Okinawa on Monday, a company official said yesterday.

Although the carrier has other aircraft to support its operations, its cash flow will be affected with the loss of one aircraft from its fleet, China Airlines spokesman Johnson Sun (孫鴻文) said by telephone.

Shares of the Taipei-based carrier slid NT$0.10, or 0.79 percent, to close at NT$12.60 on the Taiwan Stock Exchange yesterday.

Sun said bookings may also fall in the short term before public confidence can be restored, he said, without giving estimates of the sales drop.

Sun said the carrier had not yet finished evaluating estimated losses from the accident.

The price tag of a B737-800 passenger jet is between US$70 million or US$80 million, but Sun refused to reveal how much China Airlines paid for the aircraft and what the estimated compensation from insurance companies was.

Seven insurers led by Taiwan Fire & Marine Insurance Co (TFMI, 台灣產險) are likely to report a total insurance claim of between NT$1 billion and NT$1.5 billion, as the China Airlines aircraft is fully insured, Taiwan Ratings Corp (中華信評) said.

Shares of Taiwan Fire & Marine, which will soon send assessors to Japan to estimate the losses, dropped NT$0.2, or 0.77 percent, to NT$25.90, after investors sold the stock on concerns over possible insurance compensation payout for China Airlines.

Taiwan Ratings, a local arm of Standard & Poor's, said yesterday that its rating on Taiwan Fire & Marine would not be affected by the incident.

"Although TFMI is the lead underwriter, its exposure is limited," Taiwan Ratings said in a statement. "The expected net loss is equivalent to 1 percent to 2 percent of the insurer's total shareholders' funds plus special reserves at the end of June," it said.

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