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CAL shares rise on talk of direct flights to China

Shares of China Airlines Ltd (CAL, 中華航空), the largest airline in Taiwan, have enjoyed strong price growth despite bearish news, thanks to optimistic market sentiment over the prospects of direct flights between Taiwan and China after the presidential election, analysts said.

CAL announced an impairment loss of US$24.81 million as a result of its investment in China's Yangtze River Express Airlines Co (揚子江快運) yesterday.

CAL stock shrugged off the bad news and climbed 3.66 percent, to close at NT$17 on the local stock market.

RIVAL EVA

Competitor EVA Airways Corp (長榮航空) also enjoyed a 4.32 percent gain to close at NT$16.9, compared with a 1.47 percent rise on the benchmark TAIEX.

Marbo Securities Investment Consultant Co (萬寶投顧) analyst Winson Wang (王榮旭) said the robust rebound in CAL's share price was largely a reflection of optimism that direct transportation links between Taiwan and China are not far off.

"Airline companies all over the world are seeing red on their balance sheets because of high fuel prices last year and the losses in CAL's Yangtze investment were therefore to be expected," Wang said.

China Airlines accumulated a net loss of NT$93.17 million in the first three quarters of last year.

YANGTZE STAKE

CAL invested US$38.79 million in a 25 percent stake in Yangtze River Express in 2006. CAL teamed up with Yang Ming Marine Transport Corp (陽明海運), Wan Hai Lines Ltd (萬海航運) and Wan Hai subsidiary China Container Express Lines to acquire 49 percent of Yangtze's shares, while China's Hainan Airlines Co (海南航空) holds the rest.

"In light of losses as a result of high fuel prices and a fleet scale still too small to profit in the short term, we decided to recognize all our impairment losses in this investment all at once in this quarter," Annie Huang (黃元玥), general manager of CAL's corporate communications and customer relations division, told the Taipei Times during a telephone interview.

Analysts said announcing the losses all at once was better than lynching the stock prices by dividing losses quarter by quarter.

Yangtze owns one B747-400 freighter, one B747-200 freighter and six B737-600 freighters, which carry out a total of 30 flights each day and have a total capacity of 700 tonnes, the company said on its Web site.
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