AirAsia jumps 14pc as carriers gain

Airline stocks gain today after the price of oil fell to a six-week low on forecasts that Hurricane Dolly would miss oilfields in the Gulf of Mexico

AIRASIA Bhd, Southeast Asia's largest low-cost carrier, jumped the most in 3 1/2 years on the Kuala Lumpur stock exchange, leading airlines higher, after the price of oil fell to a six-week low.

The carrier soared 14 per cent to RM1.04 at the close, the biggest advance since November 22, 2004. Qantas Airways Ltd gained 6.2 per cent to A$3.60 in Sydney. China Southern Airlines Co, Asia's biggest carrier by passenger numbers, surged 9.9 per cent to HK$3.43 in Hong Kong, the most in three months.

Oil fell to US$127.95 a barrel yesterday in New York, down almost US$20 from July 14's record close, on forecasts that Hurricane Dolly would miss oilfields in the Gulf of Mexico. Lower oil prices help airlines by cutting the cost of jet fuel, most Asian carriers' biggest expense.

"The drop in crude oil prices is definitely driving gains in airlines today," said Um Kyung A, a Seoul-based analyst at Shinyoung Securities Co. "Still, there's long way to go for airlines to turn profitable."

Korean Air Lines Co, South Korea's largest carrier, gained 5.2 per cent to 47,800 won in Seoul. Air New Zealand Ltd rose 7 per cent to NZ$1.23 in Wellington. Malaysian Airline System Bhd, the country's national carrier, jumped 6.6 per cent to RM3.56 in Kuala Lumpur, the steepest gain since October 2007.

In Hong Kong, Cathay Pacific Airways Ltd, the city's biggest carrier, gained 6.3 per cent to HK$15.64, the most in 10 months. Singapore Airlines Ltd rose 3.9 per cent to S$15.86 in Singapore, the largest climb in five months.

Airlines Plunge

AirAsia has lost 35 per cent this year amidst concerns that a near doubling of jet-fuel prices and a weaker ringgit will crimp earnings. The Bloomberg Asia Pacific Airlines Index, which tracks 17 airline stocks, has plunged 39 per cent.

Surging fuel prices have forced airlines across Asia to raise surcharges, cut services and ground planes in a bid to defend profits. Qantas said last week it would axe 1,500 jobs worldwide, cancel plans to hire new staff and ground as many as 22 aircraft. Korean Air expects to post a second-quarter operating loss, president Lee Jong Hee said on July 17.

The price of jet fuel rose 0.5 per cent to US$165.20 a barrel yesterday in Singapore. That's 9.2 per cent lower than July 3's record close of US$181.85. - Bloomberg