ASIA NEWS NETWORK

WE KNOW ASIA BETTER



» Business

Asiana shares affected after US accident

Publication Date : 09-07-2013

 

Shares in South Korea's Asiana Airlines shed as much as 6.4 per cent on Monday after one of its passenger jets crashed at San Francisco International Airport on Saturday, killing two people and leaving nearly 200 injured.

The losses come as analysts warned that the tragedy could have a long-term negative effect on the airline as investigators look into what happened and suggestions emerged that the accident was caused by pilot error.

In early afternoon trading, Asiana's share price sank to 4,790 won (US$4.10) before picking up slightly to 4,845 won, down 5.37 per cent.

The accident was the carrier's first passenger jet crash with fatalities since its worst-ever accident in 1993, when a Boeing 737 flew into a mountain in southwest South Korea, killing 68 passengers and crew.

It is likely to affect the second-largest South Korean carrier's business regardless of the cause of the accident, analysts said.

"You can't rule out the possibility that a fatal accident that hurts the company's reputation will sap demand for Asiana's services down the road," said Kang Dong-jin, an analyst at HMC Investment Securities.

Potentially huge insurance payouts to victims and for the aircraft will raise future premiums and increase financial burdens, he added.

But even if the crash turns out to be caused by mechanical problems with the Boeing aircraft instead of Asiana pilots' errors, it will dampen overall sentiment among air travellers customers, said Jay Ryu, an analyst at KDB Daewoo Securities.

Some commentators also said the company's decadeslong efforts to expand its presence in China will have taken a blow because the two people killed and a large number of the injured were Chinese.

Asiana flies to 20 cities across China and in 2011 made a $1.8 billion order for six Airbus A380 Superjumbos in a move seen as an attempt to cash in on surging demand from China and the rest of Asia.

Li Xiaojin, a professor at the China Aviation University in Tianjin, said, "Passengers who plan trips after the crash will try to avoid the airline and type of aircraft involved - the adverse effect on business will show for one month." The air crash may even affect the business of airlines from neighbouring countries that offer connecting flights between China and the US, he added.

Since the China-US route is the most profitable in global aviation, airlines from all over the world are eyeing the market.

Carriers from neighbouring countries, including South Korea and Japan, already hold a market share of about 40 per cent of the China-US route, Li said, and US airlines hold 35 per cent. The remaining 25 per cent is held by Chinese airlines.

Chinese passengers choose transit flights to the US primarily for their low prices, Li said, although the flight time is much longer than direct flights.

"Most Chinese passengers during summer vacations are leisure travellers, including students, and they are price-sensitive consumers," Li said.

On the other hand, good transfer services make stopover flights acceptable for Chinese passengers, he added, pointing out the possibility of services like free short tours in Seoul or Tokyo during transit.

Foreign airlines are also working on expanding their route networks in China to lure more Chinese passengers.

AFP contributed to this story.

 

Mobile Apps Newsletters ANN on You Tube