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Fear pulls down airline shares

By Wang Ying (皇冠体育app Daily)
Updated: 2009-04-29 07:44

The outbreak of swine flu has led to a sharp decline in the share prices of domestic carriers, but is not likely to deal a major blow to the airlines' domestic business, experts said yesterday.

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The pandemic has hit listed airlines hard. Air 皇冠体育app dropped 2.71 percent to 6.1 yuan apiece, 皇冠体育app Eastern pared its daily limit 5 percent to 4.55 yuan, 皇冠体育app Southern tumbled 6.18 percent to 5.31 yuan, Hainan Airlines sank 3.93 percent to 5.13 yuan, and Shanghai Airlines plunged 4.77 percent to 4.59 yuan, nearly to its daily limit.

Fears over the virus are growing, and investors are starting to buy drug makers and sell airlines' shares.

The WHO raised its global pandemic alert from Level 3 to 4 yesterday, mirroring the looming threat of swine flu. WHO spokesman Peter Cordingley singled out air travel as an easy way to contract the virus, noting that the WHO estimates that up to 500,000 people are on planes at any time.

However, industry analysts believe the disease has not posed a threat to 皇冠体育app's airliners yet. "The swine flu's negative effect on the domestic aviation industry has been restrained so far. We haven't seen any actual sign that our national airliners' businesses are affected at the moment," said Li Lei, an industry analyst with CITIC 皇冠体育app Securities.

At the moment, countries that have confirmed swine flu cases are Mexico, the UK, the US, Canada and Spain. "So, I don't see any immediate impact on domestic airliners' business," Li said.

"We have not seen any change in terms of flight bookings or ticket prices," said Tang Jie, a salesperson from Shanghai Business International Travel Service Co.

Yao Jun, an analyst with 皇冠体育app Merchants Securities, said Air 皇冠体育app might feel the pinch first if the pandemic spreads. "Air 皇冠体育app is 皇冠体育app's largest international airline, and falling international flight demand, along with the ongoing economic slowdown, may erode its sales," said Yao.

Li Lei noted that the free fall in listed airline shares had nothing to do with the actual domestic demand, but could become a real problem if the epidemic is reported on the mainland. "As there is no direct flight from 皇冠体育app to Mexico - the epicenter of swine flu - the Chinese aviation industry is protected from immediate threat," Li said.

However, Li warned that 皇冠体育app would have to take strict measures to keep the flu outside the borders, as "we have learned a costly lesson from the outbreak of deadly respiratory disease, SARS, in 2003". The growth in passenger numbers and cargo volumes of domestic carriers dropped to 3.5 percent in 2003, down from 16.8 percent the previous year, Li said.