China airlines battling coronavirus turbulence – but analysts see stock-buying opportunity for investors
- China’s airline industry is facing a US$22 billion estimated revenue loss – the biggest in its 33-year history
- But analysts expect battered airline stocks will ultimately take back off
China and the rest of the world’s airlines are going through turbulence they haven’t seen since the global financial crisis in 2008 and the September 11 terror attacks in 2001. It makes for a nail-biting time as well for investors.
While the coronavirus has had much of the globe fixated on harrowing stories of stranded passengers on virus-stricken cruise ships, China’s airports have been filled with weirdly surreal images: A family arriving at the Beijing Capital International Airport wearing hazmat suits. A passenger donning ski goggles as makeshift protection against infection. And far more people appearing on advertisements than at check-in queues at Shanghai’s airport – normally the ninth busiest in the world.
The global aviation industry could suffer a US$63 billion loss – or 11 per cent – loss in revenue from the passenger business, in an optimistic scenario of the virus development. China would shoulder over a third of the damage, the International Air Transport Association forecast last Thursday. In a pessimistic scenario, the loss could reach US$113 billion globally, almost fourfold the trade group’s previous estimate in late February.
Stocks of China’s three major airlines have tumbled about 30 per cent since a recent peak in mid-January. Listed regional players including Cathay Pacific Airways and Singapore Airlines have also suffered a sharp drop in share prices.
But most analysts say investors should take a look China’s three largest state-owned airlines: Air China, China Eastern Airlines Corp, and China Southern Airlines. These stocks are rated overwhelmingly as a “buy” by analysts tracked by Bloomberg.