Asian airline stocks take off on signs travel is ready to come back after being grounded by the coronavirus

This week, China Southern Airlines has surged 20.1 per cent in Hong Kong, while Cathay Pacific has shot up 13.2 per cent
Travel group says bottom for air services was hit in April

Stocks

Iris Ouyangin Shenzhen

Published: 2:51pm, 5 Jun 2020

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Airline stocks in China and the rest of the Asia-Pacific region have broadly advanced this week, with some recording double-digit gains on signs air traffic is coming back as global economies reopen following worldwide steps to control the coronavirus pandemic.

In China, the aviation index tracked by Wind Information gained 7.6 per cent this week.

China Southern Airlines has surged the most among the four largest Chinese airlines, shooting up 20.1 per cent this week in Hong Kong and 8.1 per cent in Shanghai. China Eastern Airlines soared 17.6 per cent in Hong Kong and 8.2 per cent in Shanghai. Air China jumped 16.6 per cent in Hong Kong, while Hainan Airlines added 1.9 per cent in the mainland.

The gains came as the International Air Transport Association said earlier this week that demand for air services bottomed out in April, while daily flights surged 30 per cent between the April 21 low point and May 27.

Staff disinfect the cabin of an aeroplane after its arrival at the Haikou Meilan International Airport in Haikou, south China's Hainan province on January 31, 2020. Photo: Xinhua

As many of the world’s economies speed up economic reopening, travel restrictions have increasingly been removed, driving the rally of airline stocks. American airline stocks surged overnight in Wall Street as investors shrugged off the frictions between China and the US and instead bet on American carriers’ resumption of flights to China.

China’s number of flights exceeds those of US airlines. Chinese airlines had the most flights in the world in May, thanks to a large domestic market with 244,400 flights. Air traffic for Chinese carriers is still down 39.4 per cent year over year, data from China-based aviation data VariFlight shows.

Air China planes are seen parked on the tarmac at Beijing Capital Airport on March 27, 2020. - Photo: AFP

“The worst time has passed for the three largest Chinese airlines,” said Xu Hanbo , analyst at CMB International Securities, referring to Air China, China Southern Airlines and China Eastern Airlines. “The rest of this year would be mainly gradual recovery of valuation for them,” Xu said.

Chinese airline stocks have also gotten a boost from government initiatives to develop the aviation industry, especially the cargo segment.

Since March, China’s State Council has vowed to enhance the industry’s ability to transport cargo to stabilise company supply chains. Beijing also provide subsidies for Chinese and foreign carriers, which use passenger planes to transport goods from China.

The gains were also seen in other parts of the Asia-Pacific region. The Bloomberg Asia-Pacific Airlines Index has advanced 17 per cent since bottoming in late-March.

This week, including intraday share prices Friday, Cathay Pacific has surged by 13.2 per cent. Korean Air Lines soared by 10.6 per cent this week. Japan Airlines edged up 2.3 per cent. Qantas Airways rose 5 per cent.

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