Ahead of the expected announcement of expanded direct flights across the Taiwan Strait this week, the nation’s two largest international air carriers reported record losses for the first three quarters last week, hit by slowing passenger traffic and high fuel costs.
China Airlines Ltd (CAL, 中華航空), the nation’s largest carrier, posted a net loss of NT$12.41 billion (US$376 million) in the January to September period, or 132 times the losses of NT$93.17 million during the same period of last year. It translated into a net loss of NT$2.74 per share, compared to a net loss of NT$0.02 a share a year earlier, the company said in a statement late on Friday.
EVA Airways Corp (EVA, 長榮航空) also reported on Friday that its net losses expanded to NT$10.47 billion in the first three quarters, from NT$896.2 million a year earlier. The No. 2 carrier said in a separate statement that its net loss per share was NT$2.68 over this period, compared with a loss of NT$0.23 a share one year ago.
As for the July to September period, CAL saw its net loss climb to NT$5.88 billion from NT$3.56 billion in the second quarter and NT$2.97 billion in the first, while EVA’s quarterly net loss expanded to NT$4.5 billion from NT$3.68 billion with a NT$2.29 billion in the previous two quarters.
The two carriers’ latest financial results came ahead of a scheduled meeting between Straits Exchange Foundation (SEF) Chairman Chiang Pin-kung (江丙坤) and his Chinese counterpart, Association for Relations Across the Taiwan Strait (ARATS) Chairman Chen Yunlin (陳雲林), this week in Taipei for the latest round of cross-strait negotiations on economic and trade issues.
Topping the cross-strait talk’s agenda is an anticipated announcement of the expansion of direct charter flights, which analysts said would benefit CAL and EVA and should attract investors to load up on the two companies’ stocks.
So far this year, shares of CAL have plunged 46.26 percent and closed at NT$7.82 on Friday.
EVA’s shares have dropped 41.56 percent to NT$7.89, Taiwan Stock Exchange tallies showed.
Before fuel prices began to show a significant drop from their peak level in July, soaring fuel costs and shrinking travel demand had prompted both CAL and EVA, along with their Asian counterparts, to cut costs by adjusting capacity and workforce.
CAL’s jet-fuel cost increased NT$17 billion in the first nine months this year from last year, causing its total fuel expense during the period to account for 50.9 percent of total operating expense, up from 41.9 percent a year earlier.
EVA, on the other hand, said its jet-fuel expense rose 39 percent in the first nine months this year from last year.
The proportion of its fuel expense in total operating expenses increased to 53 percent in the third quarter from 51 percent in the second quarter and 46 percent in the first, company tallies showed.
This explained why the two carriers remained incurring net losses in the first nine months, despite the rises in their revenue over the same period. At CAL, its January to September revenue rose 3.9 percent to NT$97.16 billion, from NT$93.54 billion a year earlier, while EVA’s revenue rose 2 percent to NT$70.10 billion, from NT$68.73 billion a year earlier, the company statements said.
But both CAL and EVA’s quarterly losses could also be attributable to their wrong-way bets on fuel prices and a new accounting rule that requires companies to mark-to-market their hedging losses on the quarterly balance sheet. CAL booked an unrealized loss of NT$2.77 billion from fuel hedging in the third quarter, while EVA reported NT$1.3 billion in such unrealized losses in the meantime, the companies said.
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