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CAL share buyback program fails to offset pilot strike concerns

2018/08/10 13:17:15

Taipei, Aug. 10 (CNA) A share buyback program unveiled by China Airlines (CAL), one of Taiwan's leading international carriers, failed to boost its share price on Friday, dealers said.

Investors remained concerned over a possible strike after pilots of (CAL) and EVA Airways, another major Taiwanese carrier, voted overwhelmingly earlier this week in favor of a strike over working hours and overseas pay issues, dealers said.

As of 1:05 p.m., shares of CAL had fallen 0.32 percent to NT$9.41 (US$0.31), off an early high of NT$9.53, with 15.72 million shares changing hands.

On the broader Taiwan Stock Exchange, the weighted index was down 0.39 percent at 10,984.81 points.

Soon after the local equity market opened, CAL shares moved higher in a knee-jerk reaction to the share buyback plan, but when the stock breached NT$9.50, selling set in, pushing the price into negative territory, dealers said.

"Investor sentiment remains haunted by a possible pilot strike," Hua Nan Securities analyst Henry Miao said. "Pilots are high-skilled professionals and if they strike, CAL will unlikely have any contingency plans."

He said that despite CAL's buyback program, investors remained on the sell side.

"The initial gains in CAL's share price today were for trading purposes only," Miao said. "The stock is unlikely to make any breakthrough as result of the share buyback program."

In a statement Thursday, CAL said it would launch a program Friday to buy back up to 50 million shares on the market at price of NT$9 to NT$14 until Oct. 9 in a bid to bolster investor confidence in the company.

The plan was announced after about 99 percent of the CAL pilots and 97 percent of the EVA Air pilots who participated in a poll Tuesday voted to strike, in the wake of unsuccessful negotiations with management.

The Pilots Union Taoyuan said it will announce a strike date on Aug. 20 if CAL and EVA Air do not offer their pilots better working conditions by then.

"CAL's bottom line is already weak and a strike will only erode its profitability further," Miao said. "That's what investors don't want to see."

In addition, he said, the airline business could suffer another blow if international crude oil prices remain high, as U.S. President Donald Trump is threatening to impose more sanctions against Iran.

Fuel accounts for about 40 percent of CAL and EVA Air's operating costs, according to Miao.

Meanwhile, CAL said it is set to issue up to NT$8 billion worth of unsecured company bonds in Taiwan, a plan that its board has already approved.

In the second quarter of the year, CAL posted NT$63.44 million in net profit, or NT$0.01 per share, down from NT$0.31 over the same period of last year.

(By Wei Shu and Frances Huang)
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