China Airlines Ltd’s (CAL, 中華航空) profit dropped to its lowest level in five quarters as fuel cost increases offset revenue gains for Taiwan’s largest carrier.
Net income fell to NT$588 billion (US$20 million) in the three months ended Dec. 31, from NT$1.18 billion a year earlier. Fourth-quarter profit, derived from the full-year earnings reported by the Taoyuan-based company yesterday, lagged behind the NT$3.12 billion average of eight analyst estimates compiled by Bloomberg.
The carrier may add “readily available” planes that are more fuel-efficient, CAL chairman Chang Chia-juch (張家祝) said on March 10, in response to this year’s 28 percent jump in jet fuel costs, its biggest expense. Surging fuel costs may undermine airlines’ profit industrywide this year, the International Air Transport Association said last month.
“The rise in fuel prices is continuing,” said Stone Lin (林溢錤), a Taipei-based analyst at Yuanta Securities Co (元大證券), who has a “sell” rating on the stock. “When oil prices are on the rise, airlines will be pressured by increasing costs.”
CAL fell 0.9 percent to NT$16.95 at the 1:30pm close in Taipei trading, before the earnings announcement. The shares have dropped 34 percent this year, compared with a 3.2 percent decline in the benchmark TAIEX.
Net income was NT$10.6 billion, or NT$2.29 per share, for the 12 months ended Dec. 31, compared with a loss of NT$3.8 billion a year earlier, ending a three-year streak of losses, the carrier said in a statement.
Separately, CAL’s board of directors yesterday approved a plan to sell NT$6 billion in five-year secured bonds at an interest rate of 1.35 percent to help repay debt, the carrier said in a statement to the Taiwan Stock Exchange.