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Cathay Pacific plunges most in 7 years

Cathay Pacific plunges most in 7 years

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 12:30 p.m. trading break yesterday.
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.
``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,'' he added.
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 Koner fuelg 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.
Higher surcharges
Cathay Pacific boosted ticket surcharges 37 percent earlier this month, the biggest increase since 2004, because of the 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 yesterday.
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 high 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.
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 that they would trim services.


Updated : 2021-04-13 18:47 GMT+08:00