The worst may be over for EVA Airways Corp (
"We estimate [this month] is the bottom and these two airlines are set to gradually rebound after that," said Peter Tseng (
Ever since the SARS outbreak began last month, the two airlines' passenger occupancy rates dropped to between 30 and 50 percent.
Last month, China Airlines estimated losses at NT$150 million while EVA is estimated to have lost NT$125 million.
Goldman Sachs Asia also believes that the worst part of the SARS epidemic is past, and any marginally positive developments on this front such as a slow down in the SARS infection rate will be positive for share prices.
The security house recommends buying EVA and China Airlines and rated them "outperform" and "market perform" respectively, Goldman Sachs said in a report on Thursday from Hong Kong.
"We believe the lifting of quarantine as well as the removal of Taiwan from WHO travel advisory list, which we expect [next month], will strongly accelerate the passenger volume recovery," the report said.
Goldman Sachs made a 12-month share price target of NT$14 for EVA and a 12-month target NT$15 for China Airlines.
Shares of China Airlines dropped NT$0.6 or 4 percent to close at NT$12.9 on the TAIEX yesterday. EVA shares were unchanged and closed at NT$12.
The Goldman Sachs report said EVA has the highest percentage of sales from cargo trnasport among Asian carriers.
Air cargo made up to 45 percent of EVA's total sales last year, while that figure is 35 percent in China Airlines, according to Tseng.
He added that cargo is a cash-cow that helped airlines survive the economic impact of SARS, as in the second quarter of this year cargo sales are expected to account for 57 percent or some NT$7.2 billion of EVA's total sales.
EVA plans to buy two or three new cargo flights this year and is expected to upgrade the cargo income percentage to above 50 percent, Tseng said.
Yesterday both airlines announced they would raise air cargo shipment charges between Taiwan and several Asian countries, including Japan, Malaysia and Thailand, by 25 to 30 percent starting Monday.
In March the airlines raised US and Europe-bound cargo fees by more than 15 percent.
Another market-watcher said cargo is not a long-term ticket.
"The market for air cargo shipment may collapse late this year," said Wang Teng-cheng (王登城) of Yuanta Core Pacific Capital Man-agement Co (元大京華投顧) in Taipei.
With several Asian airlines, such as China Airlines, Cathay Pacific Airways and Singapore Airlines, planning to buy more cargo planes this year, over-supply is expected in the near future, he explained.
Wang agreed now is the time to buy airline shares, while he stressed the investment should be short-term only.
The shares are expected to climb for the next few months and are unlikely to go beyond NT$15 per share, he said.
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