Revenue losses and a cost increase resulting from labor action by pilots at China Airlines Ltd (CAL, 中華航空) have had no effect on the company’s ratings and outlook, Taiwan Ratings Corp (中華信評) said yesterday.
“We believe that likely cost savings from lower jet-fuel prices and increasing use of more fuel-efficient aircraft can fully absorb the financial impact,” analysts Dong Jin (董瑾) and Anne Kuo (郭彥煒) from the local arm of Standard & Poor’s Global Ratings said in a note.
The two factors would allow the carrier to underpin its cash flow generation over the next 12 months, they said.
The note came one day after the airline and the Taoyuan Union of Pilots reached an agreement to end a seven-day strike.
CAL has a “twBBB+” rating with a stable outlook, Taiwan Ratings said.
The carrier’s fuel costs would decline by NT$5 billion to NT$7 billion (US$162.07 million to US$226.9 million) this year compared with last year, mainly due to lower oil prices and the adoption of more fuel-efficient A350 aircraft, the ratings agency said.
A larger staff, pilot bonuses and compensation for passengers affected by the strike might increase the airline’s costs by NT$500 million to NT$1 billion this year, Dong and Kuo said.
However, the strike’s impact on revenue would account for less than 0.5 percent of CAL’s projected revenue for this year, the analysts added.
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