TransAsia Airways shares plunge on operations suspension fears

Shares of TransAsia Airways, a Taiwan-based mid-sized international carrier, took a beating in Taipei on Monday amid rumors that the company would suspend its operations, dealers said.

After the stock market closed on Monday, TransAsia said it will suspend its flights for one day on Tuesday. But no details about the cause of the suspension or whether it would only last for a day were immediately available.

According to TransAsia, trading of its shares on Taiwan’s main stock exchange will be suspended from Tuesday.

Shares of TransAsia fell 7.14 percent to close at NT$5.21 (US$0.16), with 10.74 million shares changing hands on the Taiwan Stock Exchange on Monday. The weighted index on the exchange ended up 0.36 percent at 9,041.11.

The stock faced downward pressure soon after trading opened and selling increased on speculation that the carrier would stop its operations soon.

TransAsia denied the speculation during the session, but later issued a statement saying it would cancel its flights on Tuesday.

“TransAsia has faced rising competition from budget carriers, eroding its bottom line,” Hua Nan Securities analyst Kevin Su said.

“Deteriorating cross-strait ties has also led to a reduction in Chinese tourists to Taiwan, further affecting the carrier’s profitability.”

TransAsia flies to a dozen destinations in China, including Shanghai, Hangzhou, Fuzhou, Xiamen, Chongqing, Wuhan, Wuxi and Changsha.

“It was no surprise that many investors shunned the stock, and today’s rumors dealt it another blow,” Su said.

In the first nine months of the year, TransAsia posted a net loss of NT$2.22 billion and a loss per share of NT$3.42. In the nine month period, the carrier’s gross margin stood at minus 18.76 percent.

“My understanding is that TransAsia’s gross margin deteriorated quarter by quarter this year, and the figure hit minus 23.48 percent in the third quarter,” Su said.

Rumors that the airline was suspending operations surfaced online on Monday morning after some travel agencies found they could not gain access to TransAsia’s booking system, which was locked up.

The carrier replied that the move resulted from the need to adjust its flight schedule but denied it would suspend operations.

A TransAsia flight attendant told CNA that her work schedule has been reduced to 50 hours a month from 80 hours a month, and she guessed that her company was encountering some operating problems.

While TransAsia shares plummeted, investors turned to other carriers on the main board, Su said. China Airlines (華航) rose 0.32 percent to close at NT$9.27 and EVA Airways (長榮航) gained 0.66 percent to end at NT$15.25 on Monday.

Source: Focus Taiwan News Channel

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