China Airlines Ltd (CAL, 中華航空), the nation’s largest carrier, expects revenue and profit to improve in the second half of this year on increasing cross-strait flights and robust cargo demand, a company executive said yesterday.
The company also hopes to keep its operating cost as low as possible amid steadier oil prices, although prices are still higher than a year earlier, CAL chairman Chang Chia-juch (張家祝) told a media briefing after the firm’s annual shareholders’ meeting.
“The company had a hard time in the first half of this year because of the global natural disasters, but I see more opportunities in the second half,” Chang said.
FIT PROGRAM
Following the government’s move to open up Taiwan to Chinese free independent travelers (FIT), the company’s cross-strait flights would rise form 76 to 106 per week, with the number of destinations climbing to 25 from the current 17.
Chang said the FIT program would help boost the company’s revenue and profit in the second half of this year.
“Although we will cut ticket prices by 5 to 15 percent on certain cross-strait routes, the increasing demand should offset the negative impact from lower prices and bring us some profits,” he said.
CAL is planning to team up with more local travel agencies to attract more Chinese passengers, Chang said, adding that the company’s passenger load factor for cross-strait routes should increase 20 percent this year.
CAL’s cargo business should also contribute more to revenue in the second half of the year, as overseas vendors or manufacturers move to replenish inventories.
“Revenue from the cargo sector has been relatively low for almost a year, but I believe demand will soon rebound in the second half of the year,” he said.
Chang said that falling crude oil prices — with the price of benchmark West Texas Intermediate (WTI) crude dropping to US$90 per barrel recently — should further drive up its earnings.
ALLIANCE
CAL is also looking to offer more meticulous and convenient services to passengers by joining the SkyTeam Alliance. It will formally become the alliance’s 15th member on Sept. 29, the carrier said.
Shareholders approved a plan to pay a cash dividend of NT$0.40 per common share, based on last year’s net income of NT$10.72 billion (US$370.14 billion), or earnings per share of NT$2.31.
CAL shares surged 3.53 percent to close at NT$19.05 yesterday after the International Energy Agency announced on Thursday that it would release 60 million barrels from strategic stocks over the next month.
Shares of rival EVA Airways Corp (EVA, 長榮航空) were up 4.5 percent to NT$29, Taiwan Stock Exchange data showed.
“Investors have become more optimistic about the local transport sector’s bottom line after crude oil prices nose-dived,” Hua Nan Securities Co (華南永昌證券) analyst Henry Miao (苗台生) said.
Miao said the transport sector had been haunted by high fuel costs since the beginning of the year, with CAL posting a loss per share of NT$0.08 and EVA reporting a thin profit of NT$0.09 per share in the first quarter.
According to Hua Nan Securities, fuel costs account for about 40 percent of airlines’ operating costs and about 20 percent for shipping companies.
ADDITIONAL REPORTING BY CNA
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