Shares of TransAsia under pressure after plane crash
July 25, 2014, 12:05 am TWN
TAIPEI, Taiwan -- Shares of TransAsia Airways (復興航空), a mid-sized Taiwanese international carrier, came under pressure Thursday morning after one of its turboprop planes crashed on the outlying island county of Penghu a day earlier, killing 48 and leaving 10 injured, dealers said.
As of yesterday, shares of TransAsia had fallen 5.46 percent to NT$11.25 with 10.74 million shares changing hands, while Shares of Goldsun Development and Construction Co. (國產實業), the parent company of the carrier, had lost 3.21 percent to NT$10.55.
The weighted index on the Taiwan Stock Exchange ended up 28.18 points, or 0.29 percent, at 9,527.54.
Financials to Hit Rock Bottom
"The air crash will have a big impact on TransAsia. It was no surprise that its shares faced tremendous downward pressure soon after the local market opened," Hua Nan Securities analyst Henry Miao said.
"Although TransAsia is gearing up to expand its flight network, the crash could prevent it from doing so based on local aviation regulations.
The carrier could post a loss this year," Miao said.
Miao said another concern is that while TransAsia is planning to inaugurate the services of its budget carrier — V Air — in September, the crash could cast uncertainty over the plan.
However, as transport stocks in the local market have lagged behind the broader market, TransAsia shares saw some technical support after the stock plunged a 7 percent maximum daily limit in the early morning session.
The selling reflected fears that the accident will undermine consumer confidence in the carrier's flight safety, which could impact the airline's sales during the summer vacation period, a traditional peak season for the airline business, which will eventually erode the company's bottom line for 2014, the dealers said.
Expansion Suspend for One Year
More important, the crash is expected to lead to one year of suspension for TransAsia to get permission from Taiwan's aviation authorities to open new international routes, including the lucrative cross-Taiwan Strait services, they added.
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