As Asian airlines start to report last year's results, the grip of the region's financial winter is clear. But a few hints of spring suggest the worst may be over, and this year could start a broader recovery.

Thai Airways International released the most promising results. It reported a fourth quarter 1998 profit of 6.3 billion baht ($167 million), compared with a 26.7 billion baht loss a year earlier.

Almost one third of this came from selling two Airbus A300s, but Thai would have made it back into the black even without those extraordinary items. The biggest difference from a year earlier was in foreign exchange. That swung from a 27 billion baht loss to a 3.9 billion baht gain, enough by itself to turn Thai around.

Korean Air (KAL) was the other Asian airline returning to profit. A year earlier KAL lost almost 400 billion won ($323 million), but it reports a 1998 estimated profit of 297 billion won. Unlike Thai Airways, however, KAL's profit is due entirely to asset sales, including 18 aircraft, which generated 438 billion won. Without them, KAL would have ended last year with a loss, even though sales improved and fuel prices stayed low.

On the strength of South Korea's emerging economy, analysts predict KAL could report a 150 billion won profit this year without more asset sales. KAL officials were also optimistic when Seoul decided ahead of schedule to lift a partial flight ban imposed on KAL as a safety sanction. But shortly after, another KAL jet skidded off a South Korean runway, raising fresh concerns about the airline's safety.

Taiwan's EVA Airways managed to stay in the black for its fourth year in a row, but only just. Profit plunged 92% from NT$889 million ($27 million) to NT$75.4 million. The big dive was in the first half of the year, but EVA was able to act quickly to end the year on a positive note.

Cathay Pacific was less successful in turning around a bad first half and ended 1998 with its first deficit in 35 years. It reported a net loss of HK$542 million ($70 million), compared with a HK$1.7 billion dollar profit a year earlier. Chairman Peter Sutch says: "1998 will stand out as one of the most difficult years in the history of Cathay, as the severe conditions of the Asian economies took a heavy toll on many of our key markets."

Cathay may have reason for optimism. Last year it faced the double cost of moving to Hong Kong's new airport (HK$775 million), plus disruptions caused by that airport's chaotic opening (HK$350-400 million). Even if everything else stayed as bad, without those expenses it could still make a profit.

Australasian carriers fared better than their Asian counterparts, mostly because they were able to shift capacity quickly to other, more profitable routes. Moreover, while tourism from Asia dried up, the economies of Australia and New Zealand remained robust. Air New Zealand's profit for the last half of 1998 nudged up from NZ$82 million ($44 million) to NZ$83 million, but Qantas reported a 34% profit jump for the same period. Ansett Australia parent Ansett Holdings turned in a 48% profit increase.

Forecasters think Australia's economy may slow, however, due to a delayed reaction to Asia's crisis. Any Asian revival is likely to be modest.

Source: Airline Business