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Airline rivalries still flying - Update - also includes other articles about Japan, Malaysia, Philippines, South Korea and Vietnam

Business Asia, June, 2003

Although airlines throughout Asia are reporting dramatic reductions in customers due to the SARS outbreak, long-standing rivalries between airlines are still very much alive. Hong Kong Dragon Airlines Ltd, the city's smaller carrier, recently won the right to challenge a government ruling that allows its larger rival Cathay Pacific Airways Ltd to fly to China. Hong Kong high court judge Michael Hartmann agreed to allow a judicial review of an April decision by the city's aviation authority to allow Cathay to operate flights to Beijing, Shanghai and Xiamen. Cathay, Asia's sixth-largest carrier by sales, wants to resume service after a 13-year absence from the world's fastest-growing air travel market. Cathay must also get Chinese approval for the flights. Dragonair said the authority lacked the power to approve routes under the Basic Law, Hong Kong's mini-constitution. Dragonair has said Cathay's presence in the Chinese market could cause the smaller airline to lose as much as HK$600 million ($119 million)) a year on three routes to China. The carrier posted a profit of HK$540 million last year. Only five of the 18 China routes it operates are profitable and are subsidising unprofitable routes, Dragonair say. Shanghai, Beijing and Xiamen are among those that are profitable.

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* Japan

Japanese manufacturers cut production in April for the second time in three months as orders for semiconductors and digital cameras slumped, threatening to cut short a recovery from recession in the world's number two economy. Industrial production fell 1.2 per cent from March seasonally adjusted, the Ministry of Economy, Trade and Industry says, adding that from a year earlier, production rose 3.6 per cent. Global orders for computer chip-making equipment made by Tokyo Electron Ltd and rivals fell in April from a year earlier as customers such as Intel cut spending. Production may fall further as SARS curbs Asian demand for Japanese exports, economists and company executives say. The extent of SARS "has been unexpected and we are worried about it every day", according to Fujio Mitarai, president of Canon, Japan's biggest office equipment maker. "We'll probably be taking measures against SARS throughout the year."

* Malaysia

Malaysia's economy grew at its slowest pace in a year in the first quarter as overseas sales of Unisem Bhd and other computer chipmakers fell. Gross domestic product expanded four per cent from a year earlier, in line with analysts' expectations and slowing from a revised 5.4 per cent in the fourth quarter. Compared with the previous quarter and without adjusting for seasonal factors, the US$95 billion ($146.4 billion) economy shrank 4.3 per cent, according to the Central Bank. Bank Negara Malaysia governor Zeti Akhtar Aziz says the Malaysian economy remained resilient despite an external environment marked by heightened uncertainty and the impact of SARS on regional economies in the final part of the quarter. Concerns about a slowing economy prompted Prime Minister Mahathir Mohamad to announce a US$1.9 billion loans-and spending plan, a third bigger than similar packages unveiled by Hong Kong and Taiwan, as the nation felt the full impact of the SARS outbreak. Fear of the deadly virus has emptied seats on Malaysian Airlines System Bhd's planes and rooms in Genting Bhd's hotels. Growth in exports was 7.8 per cent in the quarter from a year earlier, a third of northern neighbour Thailand's, which is better than the Central Bank had expected.

* Philippines

The Philippines economy contracted for the first time in more than two years as an El Nino-linked drought reduced farm production and the Government cut back on building roads and bridges to curb spending. Gross domestic product shrank a seasonally adjusted 0.5 per cent in the first quarter from the fourth. That compares with revised fourth-quarter growth of 2.4 per cent and was the first contraction since the final quarter of 2000. The contraction will make it more difficult for the economy to hit the Government's 4.2 per cent to 5.2 per cent full-year growth target. Slower growth may curb tax collection, forcing the Government to sell more bonds to plug a budget deficit it estimates will be 202 billion pesos ($5.9 billion) this year. Agriculture, which makes up about a fifth of the economy and employs almost two-fifths of the country's workforce, contracted two per cent from the fourth quarter. Agriculture secretary Luis Lorenzo says the country received about a quarter less rainfall than normal in the first three months of this year, affecting production of rice, the nation's top crop.

* South Korea

South Korean factory production unexpectedly had its biggest drop in almost two years in April as consumer spending slowed, fuelling investor expectations the Central Bank will cut interest rates to a record low. Production fell a seasonally adjusted 1.9 per cent after rising a revised 0.6 per cent in March. That is the biggest decline since July 2001. From a year earlier, production climbed 1.8 per cent after rising five per cent the previous month. South Koreans are spending less, reducing sales for companies such as Ssangyong Motor Co, after the Government tightened lending rules amid concern that rising loan defaults may destabilise the banking system. As spending drops, companies are cutting back on investment in new plants and machinery. Wholesale and retail sales fell 1.6 per cent in April from the previous month after gaining 0.5 per cent in March. From a year ago, sales dropped 4.3 per cent, the biggest decline since November 1998. Corporate investment in facilities fell 4.2 per cent from last year after rising a revised 0.1 per cent in March.

Business Services Industry

Airline rivalries still flying - Update - also includes other articles about Japan, Malaysia, Philippines, South Korea and Vietnam

Business Asia, June, 2003

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