In May 2025, the drop in fuel prices and the appreciation of the Taiwan dollar helped reduce operating costs for Taiwan's airline industry, leading to an upward revision of earnings per share.

In May 2025, Taiwan's aviation industry experienced a significant reduction in operating costs due to international aviation fuel prices dropping to a three-year low and the New Taiwan dollar appreciating against the US dollar. Companies such as EVA Air, China Airlines, Tigerair Taiwan, and Starlux Airlines are expected to increase their earnings per share (EPS). The demand for outbound travel has rebounded, resulting in increased passenger and cargo traffic at Taoyuan International Airport, boosting airline revenues. The Taoyuan Aerotropolis project is advancing, further increasing the airport's capacity.

Fuel Prices Hit Low Point, Easing Airline Cost Pressure

According to reports from MoneyDJ News and CTEE, influenced by OPEC+'s continued production increase and easing geopolitical tensions in the Middle East, international oil prices have recently dropped to $61 per barrel, marking a new low since 2021. Aviation fuel prices have also declined in tandem, with Singapore aviation fuel quotes down 19% year-on-year, the lowest since August 2021.

Aviation fuel expenses usually make up 25% to 40% of an airline's total operating costs, making it a critical factor affecting profitability. According to Anue, a $10 drop in fuel prices per barrel can reduce annual costs for EVA Air and China Airlines by NT$7.2 billion and NT$6.33 billion, respectively, positively impacting EPS by more than NT$1. Although smaller in scale, Tigerair Taiwan and Starlux Airlines are also expected to benefit, with EPS estimated to increase by nearly NT$1 each.

TWD Appreciation Reduces USD-Denominated Costs

The New Taiwan Dollar has appreciated rapidly since the end of April, briefly breaking the 29 TWD to 1 USD barrier in early May, marking the largest single-day gain in nearly 40 years. Most airline costs, such as fuel, aircraft leasing, and maintenance, are denominated in USD, and the appreciation of the TWD directly reduces these expenses.

EVA Air's General Manager, Sun Chia-ming, pointed out that the appreciation of the TWD has a positive impact on airline operations, not only reducing costs but also boosting the willingness of Taiwanese to travel overseas. He stated, "Fuel is paid in USD, so the appreciation of the TWD is certainly beneficial for operations." Additionally, the appreciation of the TWD allows travelers to exchange less TWD for more USD, reducing the cost of traveling abroad and further stimulating outbound demand.

EPS Estimates Revised Upward, Airline Stocks Shine

According to Anue's analysis, benefiting from the dual advantages of fuel and exchange rates, the EPS estimates for major airlines in 2025 are as follows:

• EVA Air (2618): NT$4.84
• China Airlines (2610): NT$2.13
• Tigerair Taiwan (6757): NT$6.32
• Starlux Airlines (2646): While its EPS remains relatively conservative due to its unique debt structure and external exchange gains, its growth rate is above the industry average.

These figures reflect a significant improvement in the profitability of airlines against the backdrop of reduced costs and rising demand.

Outbound Travel Boom, Taoyuan Airport Traffic Rebounds

The recovery in travel demand also supports airline revenue. According to statistics from Taoyuan International Airport Corporation, passenger traffic in the first quarter of 2025 reached 11.75 million, a year-on-year increase of 5.2%. The annual passenger traffic is expected to return to the pre-pandemic level of 49 million.

EVA Air's consolidated revenue in April reached NT$18.478 billion, a record high for April, with passenger revenue reaching NT$11.835 billion, a month-on-month increase of 2.25%, and a load factor exceeding 90%. The demand for short-haul routes was boosted by the cherry blossom season in Japan, the Qingming Festival holiday, and the Southeast Asia travel boom, while long-haul routes benefited from Easter and the North American tax season, with strong booking rates.

Stable Cargo Demand, North American Routes Support Growth

Despite the U.S. canceling the tax exemption policy for packages under $800 from China and Hong Kong, impacting some e-commerce shipments, overall cargo demand remains stable. Taoyuan Airport's cargo volume in the first quarter of 2025 reached 569,000 tons, with demand on North American routes increasing by 7.3% year-on-year.

Cargo revenue accounts for 29% and 31% of China Airlines and EVA Air's total revenue, respectively. The stable demand in the North American market helps offset the impact of policy changes. EVA Air also stated that if cargo volumes from China decrease, they will adjust capacity to the Southeast Asian market to maintain operational efficiency.

Taoyuan Aerotropolis Construction Advances, Enhancing Overall Capacity

The Taoyuan Aerotropolis project continues to advance, serving as a transportation and economic hub in northern Taiwan. The total area of the aerotropolis is 4,500 hectares, with an estimated total investment of NT$500 billion, expected to generate NT$7 trillion in economic output in the future. Companies such as Starlux Airlines and DHL have already set up operations, and plans are underway to build hotels, offices, and shopping malls, further enhancing Taoyuan Airport's passenger and cargo handling capabilities.

References

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