Airline stocks in China slump as bird flu claims more deaths; Southwest pulls off a quality deal

Victoria
By Victoria April 5, 2013 11:39

Airline stocks in China slump as bird flu claims more deaths; Southwest pulls off a quality deal

 

On this service we reported at length the worries on the horizon in 2013 for airline investors back in November 2012, specifically highlighting bird flu in the Asia Pacific region and coronavirus (nCoV) in Middle East/APAC/Europe as issues to watch out for since they will certainly affect airlines at some point. Now, after many months of shorting stocks, many will this week be selling off airline shares, which are predicted to take an unusually violent hit.

Bird flu is making the headlines but it is nCoV that has the potential to cause real damage. On the March 26, 2013, the World Health Organization (WHO) was informed of 17 confirmed cases since April 2012, with nine resulting deaths (for a mortality rate of 56%). Most cases (11) were in Saudi Arabia, Qatar, United Arab Emirates and Jordan, although three were in the United Kingdom. The primary UK patient had recently travelled to Saudi Arabia and Pakistan, and was the source of infection for two people in his household, confirming human-to-human transmission of the virus.

The bird flu strain is being treated with a SARS-like panic at the moment but it is not confirmed as yet to be able to pass between humans and thus this is no SARS strain type crisis or at this time anything close to it. The current bird flu outbreak in China is a new strain and has killed six people thus far (that have been confirmed). This has caused shares of Chinese airlines to fall by more than at any time since the credit crisis. Some 14 people are known to have the H7N9 virus in China and the death rate is currently topping one third of those infected. The problem this time is that the virus is centered on the Shanghai area, the financial center of China and the second largest city and the aviation capital of China. Mass slaughter of poultry has already started in the Shanghai area.

The H7N9 virus is dangerous because it has mutated so that it can more easily infect more animals such as pigs, meaning the range of this problem could be extensive.

China Southern Airlines, which deploys around 78% of its capacity on the domestic market, was down 10.6% at HK$3.78 at early afternoon trading on Friday, the stock’s biggest one-day decline since April 27, 2009.  Air China shares fell 11.9% at HK$5.92; with China Eastern Airlines also down 8.9% at HK$3.08, its biggest single day decline since October 2011.

Meanwhile, Southwest Airlines confirmed on April 2 that it has closed a $1bn revolving credit facility and has terminated the revolving credit facility dated April 28, 2011, which would have expired April 28, 2016. See Americas, Finance section below for more details.

Victoria
By Victoria April 5, 2013 11:39
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