Wirraway
8th Apr 2003, 12:23
Tues "The West Australian"
SARS puts further strain on Qantas
By Geoffrey Thomas
QANTAS Airways may be forced to book a $300 million write-down on aircraft values and cut its dividend by up to 30 per cent because of the impact of Asia's severe acute respiratory syndrome (SARS) on the tourism industry.
One leading Asian investment bank, which did not want its name revealed for fear of breaching Hong Kong regulations, said the sharp downturn in air travel could cause Qantas to write off six of its less efficient Boeing 747-300s and four 767-200s.
That bleak view is supported by Australian broker JBWere, which has indicated these aircraft may be worthless.
Some analysts also believe Qantas' onerous capital expenditure requirements for yet-to-be-delivered Boeing 737s and A330s may also force the airline to conserve cash by cutting its dividend by as much as 30 per cent.
Late last month, Qantas warned it would miss full year market profit forecasts of $594 million by as much as 15 per cent.
The airline has reduced capacity for the June quarter by 8 per cent but has warned there could be further reductions to 12 per cent through to mid-July.
Some Qantas insiders fear SARS will have a far bigger impact on the Asian airline industry than the war in Iraq.
The analysts' warnings are supported by Peter Harbison, managing director of the Centre for Asia Pacific Aviation, who cautioned that SARS was rapidly becoming a serious threat to air travel throughout the region.
"Intra-Asian traffic has been only relatively lightly affected by the Iraq conflict, but SARS is a real threat to traveller confidence in specific markets," Mr Harbison said.
"This (SARS) further exaggerates what is clearly now developing into a near-worst case scenario for the airline industry.
"Recent service cutbacks are already more severe than those that occurred in the 1991 Gulf War on the back of what is already a distressed industry and there is little indication of a short-term improvement."
Mr Harbison said the situation remained fluid. "More announcements of cutbacks are expected from carriers over coming days," he said.
Qantas has redeployed aircraft to domestic routes and has slashed fares by as much as 40 per cent to stimulate demand.
However, most analysts canvassed by The West Australian agreed that once the Iraq conflict and SARS were off the agenda, Qantas would be a star performer, with some tipping its share price to top $5 within 12 months.
While Qantas is battening down, Hong Kong-based Cathay Pacific is in severe turbulence with analysts slashing its profit forecast by 30 per cent.
The Hong Kong Tourism Board reported last week that tourist arrivals had plummeted by up to 50 per cent, as the World Health Organisation took the unprecedented step of issuing a travel advisory recommending against all but essential travel to Hong Kong and Guangdong Province in China.
Many hotels in Hong Kong and all around Asia are reporting single-digit occupancy rates, while some hotels in Australia and Perth are down by up to 30 per cent.
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SARS puts further strain on Qantas
By Geoffrey Thomas
QANTAS Airways may be forced to book a $300 million write-down on aircraft values and cut its dividend by up to 30 per cent because of the impact of Asia's severe acute respiratory syndrome (SARS) on the tourism industry.
One leading Asian investment bank, which did not want its name revealed for fear of breaching Hong Kong regulations, said the sharp downturn in air travel could cause Qantas to write off six of its less efficient Boeing 747-300s and four 767-200s.
That bleak view is supported by Australian broker JBWere, which has indicated these aircraft may be worthless.
Some analysts also believe Qantas' onerous capital expenditure requirements for yet-to-be-delivered Boeing 737s and A330s may also force the airline to conserve cash by cutting its dividend by as much as 30 per cent.
Late last month, Qantas warned it would miss full year market profit forecasts of $594 million by as much as 15 per cent.
The airline has reduced capacity for the June quarter by 8 per cent but has warned there could be further reductions to 12 per cent through to mid-July.
Some Qantas insiders fear SARS will have a far bigger impact on the Asian airline industry than the war in Iraq.
The analysts' warnings are supported by Peter Harbison, managing director of the Centre for Asia Pacific Aviation, who cautioned that SARS was rapidly becoming a serious threat to air travel throughout the region.
"Intra-Asian traffic has been only relatively lightly affected by the Iraq conflict, but SARS is a real threat to traveller confidence in specific markets," Mr Harbison said.
"This (SARS) further exaggerates what is clearly now developing into a near-worst case scenario for the airline industry.
"Recent service cutbacks are already more severe than those that occurred in the 1991 Gulf War on the back of what is already a distressed industry and there is little indication of a short-term improvement."
Mr Harbison said the situation remained fluid. "More announcements of cutbacks are expected from carriers over coming days," he said.
Qantas has redeployed aircraft to domestic routes and has slashed fares by as much as 40 per cent to stimulate demand.
However, most analysts canvassed by The West Australian agreed that once the Iraq conflict and SARS were off the agenda, Qantas would be a star performer, with some tipping its share price to top $5 within 12 months.
While Qantas is battening down, Hong Kong-based Cathay Pacific is in severe turbulence with analysts slashing its profit forecast by 30 per cent.
The Hong Kong Tourism Board reported last week that tourist arrivals had plummeted by up to 50 per cent, as the World Health Organisation took the unprecedented step of issuing a travel advisory recommending against all but essential travel to Hong Kong and Guangdong Province in China.
Many hotels in Hong Kong and all around Asia are reporting single-digit occupancy rates, while some hotels in Australia and Perth are down by up to 30 per cent.
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