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~~~~~((#))006002000r-Aviation & Airlines

~~~~~((#))016001000f-Company News

Virus and war bludgeon Asian airline stocks

HONG KONG: Asia-Pacific airline shares took a beating on Monday as the spread of a deadly pneumonia virus and worries of a prolonged war in Iraq kept passengers at home and led carriers in the region to cut flights.

The mysterious virus has exacerbated woes for regional airlines already suffering from lower demand and higher oil prices. Asian airlines, which were not hurt nearly as badly as their US counterparts following the September 11 attacks, were down between three and eight percent in morning trade.

"The SARS outbreak in Asia is emerging as a significant issue for the regional airlines sector," Merrill Lynch analyst Simon Gresham wrote in a research note, referring to Severe Acute Respiratory Syndrome, which has infected more than 1,600 people globally and killed 59, including 13 people in Hong Kong.

Shares in Cathay Pacific Airways, whose Hong Kong base is at the center of the virus outbreak, tumbled 7.35 percent to HK$9.45, a level not seen since December 2001, after the airline said it was soon likely to cut flights.

In South Korea, Asiana Airlines Inc said on Monday it would cut loss-making routes and sell non-core assets due to the war and slowing economy. Shares in the carrier tumbled 6.42 percent to 2040 won, while bigger rival Korean Air was off by 6.93 percent at 9540 won.

In Singapore, the government said on Monday it would deploy nurses to screen passengers arriving from areas hit by the virus, including Hong Kong and neighbouring Guangdong province, Beijing, Shanxi, Taiwan and Toronto. Singapore said five air passengers brought the virus into the city-state.

Singapore Airlines shares were down by 3.31 percent on Monday at S$8.65, their lowest level since November 2001.

Air New Zealand , meanwhile, said it was cancelling some flights to the United States and Asia as the Iraq war and the virus hurt bookings. Its shares fell four percent to NZ$0.48.

"Travel patterns are likely to be severely affected within Asia (HK/Singapore in particular) until medical advice on containment and treatment becomes more definitive," Merrill Lynch's Gresham said.

A Thai Airways International Plc official said bookings for April had dropped about 10-15 percent year-on-year so far, with journeys to Kong Kong and Singapore most affected.

"We have seen major cancellations to these countries ... and the trend is likely to continue," the executive said.

Thai Airways shares were down 4.88 percent at 29.25 baht.

CHINA REGION HARD HIT

Shares in mainland carrier China Southern Airlines Co Ltd, which is based in the virus-hit southern city of Guangzhou, fell by 8.67 percent to HK$1.79, while its Shanghai-based rival China Eastern Airlines Corp Ltd was down by 5.38 percent to HK$0.88.

New bookings in Hong Kong were down by 30-35 percent last week from the same period a year earlier, according to Abacus Distribution Systems (HK) Ltd, which processes air tickets for 80 percent of the city's travel agents.

"CX (Cathay Pacific) operates from the very eye of the current SARS storm and is more at risk than most to its impact," UBS Warburg wrote in a research note that downgraded its investment rating on the stock to "reduce" from "neutral."

Shares in China National Aviation Co (CNAC), which owns 43 percent of number-two Hong Kong carrier Dragonair and 51 percent of Air Macau, plunged 7.5 percent to HK$1.10, their lowest level since late 2001.

"We expect the Severe Acute Respiratory Syndrome scare ... to have a major impact on Hong Kong and China inbound traffic," Daiwa Institure of Research wrote in a note downgrading its revenue, profit and traffic forecasts this year for CNAC.

In Taiwan, concerns that the virus would hurt demand for flights to Hong Kong -- the busy Taipei-Hong Kong run is known as the "Golden Route" for its profitability -- pushed shares in its two main carriers down to the seven percent limit.

China Air Lines was off by 6.98 percent at T$12.00, while EVA Airways was down 6.82 percent to T$10.25.

PAIN FELT ACROSS REGION

Elsewhere in Asia, shares in the region's largest carrier Japan Airlines System were down by 1.69 percent at 232 yen after it said on Friday that Japan's Fair Trade Commission had denied its request to raise domestic fares in response to the war in Iraq and higher fuel costs.

The carrier has already said it would cut eight percent of its flights in April due to the war, and was put on creditwatch by Moody's Investors Service on Thursday for possible downgrade.

Rival All Nippon Airways Co Ltd shares were down 1.77 percent to 222 yen.

Australian carrier Qantas Airways Ltd dipped 0.67 percent to A$2.98 after announcing last week it would cut capacity on international routes by 20 percent and warning that it would miss market profit forecasts for its year ending June 30.

"Although the capacity cuts caused by the war in Iraq and the effects of Severe Acute Respiratory Syndrome will affect some of Qantas' most profitable international routes, the airline is in a better position than most of its peers to withstand the severe conditions facing the industry in the near term," Standard & Poor's wrote in a note affirming the carrier's credit ratings.

Malaysian Airline System shares were off by 3.37 percent at 3.44 ringgit.-Reuters