This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Steer Clear of This Chinese Industry

So this month China Southern said it would get a 2 billion yuan ($314.7 million) injection of capital from the Chinese government in form of equities. Its debt grew last year to 75.8 billion yuan despite capital raising forays in 2008 and 2010. Earlier this month China Eastern announced plans to sell as much as 8.8 billion yuan in bonds to buy aircraft and repay loans. Its debt came to 92.9 billion yuan as of the end of 2011. Air China, with debts of about 124 billion yuan, said in April it would issue 1.05 billion yuan in shares to its controlling state-run shareholder for debt relief and more capital. Debt-to-equity ratios have generally run higher for Chinese airlines compared to the rest of Asia.

Still, the number of commercial aircraft will double from last year to about 4,000 by 2015, the Chinese civil aviation authority said this month. "Capacity has kept very well with demand," notes Paul Yong, equities research vice president with DBS in Singapore. "Of course (China) comes from a past where these airlines don't have strong balance sheets."

And new aircraft, of course, runs up a bill, while foreign competitors have essentially the same planes. No, they have more. Airlines in Southeast Asia, for example, easily outdo China's in-flight service.

Last I checked, most flight attendants on Chinese airlines could barely speak English. They would know whether you wanted fish or chicken, if you could stomach either, but couldn't field a question about in-flight movies, if there were any. Compare that to the slick service of Thai Airways, the exquisite professionalism of Singapore Air and the games on board Cebu Pacific Air.

Tens of millions of people depart China every year, usually by air. That figure should reach 82 billion passengers by 2014, a growing slice of 1.26 billion people headed abroad by air worldwide that year, the International Air Transport Association predicts. Someone stands to make money on their business.

Because of high fuel costs, mainstream-versus-budget airline competition and the global economic slump of mid-2008 followed by late 2011, airline equities in most any country are considered a risky investment. But that could change for carriers with strong reputations and equally robust fundamentals. Some have already cleaned up.

2 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AAPL $128.46 0.00%
FB $78.97 0.00%
GOOG $558.40 0.00%
TSLA $203.34 0.00%
YHOO $44.28 0.00%

Markets

DOW 18,132.70 -81.72 -0.45%
S&P 500 2,104.50 -6.24 -0.30%
NASDAQ 4,963.5270 -24.3630 -0.49%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs