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Asian Airlines Hit by Japan, Rising Fuel Costs

This is a transcript of top stories presented by China's CCTV Business Channel as produced by CNBC Asia Pacific.

A big hello to our viewers across China. I'm Saijal Patel and you're watching "Asia Market Daily".

The unrest in the Middle East has been driving up oil prices around the world.

Since the start of the year, crude is up about 14 percent, fueling fears it could stall the global recovery.

Overnight, U.S. president Barack Obama took steps to mitigate the fallout from costly crude - calling for deep cuts to US oil imports.

Obama wants to reduce foreign crude by a third over the next decade.

But analysts have dismissed the ambitious goal.

(SOT) Oscar Carboni, President, OMNI Trading Academy:
We've heard this from many administrations, many presidents in the past, in fact for about 40 years I can remember hearing this very same thing - we need to decrease dependency on foreign oil - but not much has really come of it. So I don't know if much can come of this.

Oscar Carboni of OMNI Trading Academy is clearly among the group of skeptics, warning the incentives announced are too little, too late.

(SOT) Oscar Carboni, President, OMNI Trading Academy:
Oil getting above $120 a barrel will absolutely smash our economic recoveries. So these incentives that our President is putting forth are great incentives, but they would take way too long to stop the pressure that we are going to feel right now if the price of oil is allowed to go higher. And I can say the price of oil going higher is very detrimental.

The higher prices are also impacting regional airlines - with jet fuel surging almost 30 percent in the past three months.

To offset those soaring costs - as well as lost earnings following the New Zealand and Japan quakes, and the Queensland floods - Australian carrier Qantas is slashing capacity, retiring aircraft and sacking staff.

In response, Moody's has changed its rating outlook on Qantas, from stable to negative.

(SOT) Siva Govindasamy, Asia Managing Editor, Flightglobal:
Fuel comprises about 30 to 40 percent of an airline's total expenses every year. So if fuel costs keep rising, airlines are going to start worrying about it. They can hedge, they can put on fuel surcharges, but the reality is they can't absorb all of these rising costs. So that is going to be an issue.

As well as facing higher jet fuel prices, many Asian operators are canceling or reducing flights to Japan, because of radiation concerns and a drop in passenger demand.

Research shows Korean airlines will be hit the hardest - as 20 percent of their revenues come from services to Japan.

Other Asian carriers - such as Cathay pacific - have about 6 percent revenue exposure to Japan.

(SOT) Siva Govindasamy, Asia Managing Editor, Flightglobal:
Korea effectively serves as a hub to Japan. The other guys who are really affected are Qantas, who are very exposed to Japan. But also Qantas is suffering because of the recent natural disasters in Australia and New Zealand, so it's really a bit of a dicey time. Japan by itself is a very big leisure and business market. So airlines will be very worried about this. They will be hoping that this, Japan will be able to overcome this very quickly.

That caps off today's "Asia Market Daily".

I'm Saijal Patel from CNBC, thanks for watching.

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