Worldwide airline shares up 3% in August

Singapore

AIRLINES' share prices worldwide edged up 3 per cent month- on-month in August, slightly stronger than the 2 per cent growth in the broader market, as easing jet fuel prices offered some relief.

According to the latest Airlines Financial Monitor by the International Air Transport Association (Iata), airline stocks across all regions saw an improvement during the month, although US carriers led the pack with a 5 per cent increase.

In the stock market on Friday, Singapore Airlines (SIA) closed at S$10.10, unchanged from Thursday. For the month of August, the counter also hit a high of S$10.10.

Hong Kong's Cathay Pacific gained two HK cents to end the day's trading at HK$14.36 (S$2.32) on Friday, down from August's high of HK$14.96.

Meanwhile, Australia's Qantas gave up 2.5 Australian cents to close at A$1.54 (S$1.81) on Friday. In August, the stock hit a high of A$1.47 and a low of A$1.275.

North American carriers also delivered a strong report card in the second quarter, the Iata financial monitor showed. A sample of 14 North American airlines saw net profit nearly double to US$3.72 billion for 2Q14 from the corresponding quarter a year earlier, while operating profit surged from US$3.69 billion to US$5.99 billion.

Asia Pacific carriers, on the other hand, turned in an operating loss of US$21 million, versus an operating profit of US$245 million in 2Q13.

However, the region's carriers also pulled out of the red with a net profit of US$234 million, vis-a-vis a net loss of US$349 million a year ago. The report used a sample of 16 Asia Pacific carriers, without disclosing which ones.

"In Asia Pacific, a combination of weakness in cargo revenues as well as rising cost pressures for Chinese carriers due to a depreciating local currency have had negative impacts on regional financial performance," the Iata report said.

Crude oil prices slipped 4 per cent in August over July, as signs point to weaker demand from both Europe - where the flare-up between Russia and Ukraine has impacted the eurozone's economic recovery - and Asia. Jet fuel prices were also down 4 per cent in August but remain close to the US$120 per barrel threshold, which is still high by historical standards.

US passenger yields picked up in 2Q14, although yields for other regions remain weak. South-east Asian airlines, for instance, are seeing yields come under pressure from stiff competition and overcapacity in the market.

For the January to July period, passenger traffic (measured in revenue-passenger-kilometres) for Asia Pacific was up 6.8 per cent, although this was outpaced by a sharper 7.6 per cent expansion in capacity. As such, passenger load factor worked out lower at 77.1 per cent.

On the cargo front, freight traffic (in freight-tonne-kilometres) increased 5 per cent year to date, while capacity grew at 6.2 per cent, causing freight load factor to inch downwards to 54.7 per cent. For the month of July alone, however, the region's carriers helped to drive strong industry performance as trade volumes in the Asia Pacific rebounded following a decline in 1Q14.

Globally, air passenger volumes continued to rise steadily in July, underpinned by robust gains in key regions. But a weaker eurozone economy remains a potential downside risk where air travel growth is concerned, Iata warned.