NEWS

>> Alitalia Shares Hit Record Low  [November 24, 2005]

   Alitalia shares fell to their lowest level in its history on Wednesday as plans for its EUR1 billion (USD$1.2 billion) capital increase failed to alleviate concern about the cash-strapped airline's problems.

Shares in state-controlled Alitalia at one stage hit a record low of 0.945 euros, close to the discounted asking price of 0.80 euros for new stock being issued to stave off possible bankruptcy. The share price closed down 6.7 percent at 0.976 euros.

Analysts cited nagging concerns about the airline's exposure to high fuel prices, encroaching competition, union strife and the high cost of fleet renewal -- even after the capital injection.

The capital increase is running in stages from November 14 to December 2. The government is buying nearly half the shares, and a consortium of bank underwriters led by Deutsche Bank have guaranteed the rest.

One of Alitalia's shareholders, Air France KLM, said on Wednesday it would subscribe EUR20 million (USD$23.6 billion) to the capital increase in order to keep its Alitalia stake steady at 2 percent. But Alitalia shares failed to rally on the decision, which a senior Air France KLM executive said was only a "psychological statement to accompany the Alitalia management and where possible support them".

"We cannot solve their internal and domestic issues," the executive, who spoke on the condition of anonymity, said.Air France's Chairman Jean-Cyril Spinetta, who sits on Alitalia's board, spoke highly of the company's turnaround plan.But he acknowledged that Alitalia's failure to hedge against high fuel prices had wiped away many of the gains from its restructuring, which included job cuts. That has stoked tensions within the airline, with unions threatening strikes."Like some other airlines in the world, not being covered on their fuel costs has not helped their situation," Spinetta told reporters in Paris."If jet fuel had been at the USD$40 a barrel level, which both they and we were expecting at the beginning of the year, then they would have very largely improved their position." Alitalia posted nine-month losses of EUR118.8 million (USD$140.2 billion), compared with a loss of EUR685.4 million (USD$808.9 billion) in January-September 2004, when it factored in heavy restructuring costs.

Looking to Alitalia's future, Spinetta said: "It must first get into a cash-neutral position and then get into a position to renew its fleet as a second step."The company forecasts a profit next year, but some analysts doubt this will be possible.Alitalia said it would cancel 230 flights on Friday due to a four hour general strike across Italy.

(Reuters)

>> Korean Air, Asiana to cut fuel surcharges on Dec [November 22, 2005]

   SEOUL, Fri: Korean Air Lines Co and Asiana Airlines Inc, South Korea’s two largest carriers, will cut fuel surcharges for the first time since they were imposed in April after jet fuel prices fell, following two other Asian carriers.

Korean Air and Asiana will lower fuel surcharges on international routes by as much as 36 per cent for a return-fare per passenger starting December 1, in line with government regulations, the carriers said.
South-East Asian carriers such as Malaysian Airline System Bhd’s cargo unit and Philippine Airlines Inc announced this month cuts
in their surcharges as fuel prices fell. The price of jet fuel has dropped 25 per cent since reaching a record high of US$85.355 (US$1 = RM3.78) a barrel on October 3, according to oil-pricing service Platts.
“As fuel costs have dropped from record prices, we will be lowering the surcharge costs,” said Lee Hyoung Woo, a spokesman at Korean Air today.
Korean Air and Asiana had imposed surcharges on tickets, hedged fuel requirements and cut other expenses like other airlines in the region to reduce the impact of higher fuel costs, which account for as much as 34 per cent of operating expenses of Asian carriers.
The South Korean Government allowed the two airlines in March to raise fares on overseas routes by as much as US$30 a ticket starting April 10 if the price of jet fuel rises above the average in the previous month. Every US$1 rise in the price of oil raises Korean Air’s costs by 30 billion won, or US$30 million, a year and Asiana’s expenses by about 15 billion won. — Bloomberg

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