Fitch: Impact on some Asia airlines

Fitch Ratings said it said the Cross-Strait Air Transport agreement between China and Taiwan will benefit airlines based on the mainland and the island, but existing Hong Kong-Taiwan transport services by Taiwanese operators also will be negatively affected by the new agreement.

Fitch said it believes that changes in jet fuel costs and the impact of the economic downturn will play a more significant role in driving the credit strengths of these airline companies than the agreement.

In principle, the new agreement will benefit China-based airlines such as Air China Ltd., China Eastern Airlines Corp. Ltd. and China Southern Airlines Co. Ltd., as well as Taiwan-based peers including China Airlines Ltd. and EVA Airways Corp., Fitch said.

Carriers based in Hong Kong and Macau, such as Cathay Pacific Airways Ltd., Hong Kong Dragon Airlines Ltd. and Air Macau Co. Ltd. are likely to see a decline in revenues from flights connecting to Taiwan, the agency said.

However, the benefit of direct flights can only moderate the impact from the global economic downturn as these flights only account for a limited portion of total traffic, Fitch said.

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