Business

Wednesday September 2, 2009

Airlines raising more cash from higher prices


KUALA LUMPUR: Airline share prices rose 3.6% this month to 7.4% from the previous month, giving them the opportunity to raise more cash during these trying times, the International Air Transport Association (IATA) said yesterday.

However, it noted that the sector underperformed the market, which rose 23% so far this year as investors adopted a more cautious stance on firms exposed to the rise in oil prices.

“Stronger equity markets give airlines an opportunity to raise the much needed cash. Since the start of the year, airlines have raised US$3bil in equity and US$12bil from new debt issues,” it said in a statement.

IATA also said that airlines reported further deterioration in earnings in the second quarter of 2009 with a few exceptions in the Americas. — Bernama

It noted that the airlines had reported a loss in the second half of 2008, although they usually made 50% of their profits in this seasonally strong quarter.

This year, the second quarter losses of US$2bil followed the first quarter losses of US$4bil.

However, IATA said the total industry losses in the first half of 2009 were likely to be in excess of the reported US$6bil.

According to IATA, the rise of jet fuel to above US$80 per barrel was also squeezing airlines’ cash flow coupled with declines in passenger and cargo yields.

Nevertheless, the association said that air freight tonnage and passenger numbers were now starting to improve, with both rising more than 3% in July from the previous month, but remaining well below levels seen the same time last year.

“Freight is being driven by the inventory cycle, which stabilised in the first quarter while destocking in the second quarter lead to some recovery in shipment,” it said.

”Travel only began to stabilise at the end of the first quarter. There was a material improvement in July, but the future path is likely to be volatile and weaker than normal recoveries,” it added.

IATA said capacity cuts were also diminishing with the exception of the Middle East, albeit, at a rate considerably less than the slump in travel demand. — Bernama

 
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