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HONG
KONG—Cathay Pacific Airways Ltd., Hong Kong’s largest
airline, dropped the most in almost seven years on the
city’s stock market after fuel prices surged and UBS AG
downgraded the carrier to “sell.”
The
airline fell as much as 7.6 percent, and was down 4.3
percent at HK$15.56 as of the noon trading break
Tuesday. It didn’t trade Monday because of a holiday in
Hong Kong.
Cathay
Pacific and other Asian carriers have plunged in 2008 as
they struggle to cope with jet-fuel prices that have
doubled in a year through surcharges, hedging and cuts.
Korean Air Lines Co. said Tuesday it will let male
employees come to work without wearing ties as it’s
reducing the use of air conditioning.
“The
airlines have to do whatever they can to cut costs to
help cover the fuel prices,” said Jim Wong, an analyst
at Nomura International in Hong Kong. “The market is
also now worrying that a slowdown could curb demand.”
The
price of jet fuel—most Asian carriers’ biggest
expense—rose 6.5 percent Monday in Singapore to $172.75
a barrel. That was the biggest jump in more than three
years.
China
Southern Airlines Co.,
Asia’s biggest carrier by passenger numbers, fell 3.5 percent to
HK$4.36 in
Hong
Kong trading. Air China Ltd., the nation’s largest
international carrier, dropped 4.9 percent to HK$5.10.
China Eastern Airlines Corp., the country’s
third-biggest carrier, slipped 4.1 percent to HK$3.05.
Cathay
Pacific boosted ticket surcharges 37 percent earlier
this month, the biggest increase since 2004, because of
rising fuel costs. Singapore Airlines Ltd., Qantas
Airways Ltd. and other carriers have made similar moves.
Still, higher ticket prices may deter travelers, already
suffering from rising job insecurity and higher costs
for food and other goods.
“Higher
fares could ultimately reduce demand,” UBS analyst
Damien Horth said in a note to clients Tuesday.
The
bank, which previously rated
Cathay “neutral,” trimmed its target price 12 percent to HK$15.00.
Credit Suisse Group AG separately cut its target price
16 percent to HK$14.80. Analysts Sam Lee and Hung Bin
Toh maintained a “sell” rating.
Cathay
Pacific would need to double surcharges or raise average
fares 20 percent to cover its higher fuel costs,
JPMorgan Chase & Co. analyst Corrine Png said in a
research report dated Monday. She began coverage of the
carrier with an “underweight” rating and a HK$13.70
target price.
Korean
Air office workers will be able to come to work without
ties from June 10 to August 31, the carrier said
Tuesday. Flight attendants and others who must wear
suits will be excluded from the measure. The carrier,
South Korea’s biggest, fell 2.1 percent to 50,300 won in
the midafternoon trading in Seoul.
The
airline is also one of at least seven major Asia-Pacific
carriers to have announced plans to cut capacity since
May 26 because of surging jet-fuel costs. China Airlines
and EVA Airways Corp., Taiwan’s two largest carriers,
both said Monday they would trim services. (With
reporting from Seoul/Bloomberg) |
