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In Asia, the Best of Airlines and the Worst of Airlines

China Airlines, for one, is flying at a low altitude, but others such as Qantas are taking wing.

HONG KONG -- For investors in airline stocks, few regions offer as wide a range of choices as Asia, where some of the best and many of the worst carriers are based.

Among the former lurk some reasonable-looking bargains. But with carriers such as

China Airlines

, Taiwan's flag-bearer, foreign investors should be as careful choosing Asian airline stocks as pilots are supposed to be in the air.

CAL's blighted safety record got a little more awful this past Sunday when one of its jets flipped over and caught fire during a landing in Hong Kong. Miraculously, all but two of the more than 300 passengers survived. Hundreds of others who perished in CAL crashes earlier this decade -- many of which have been blamed on pilot error -- weren't as fortunate.

The airline's problems are an unfortunate testament to the way many capital-intensive industries are run in Asia. Just like a government department, political appointees, who shuffle in and out of the airlines' ranks, fill many of the posts. Few of the region's airlines have been able to instill a real culture of safety and training.

While CAL has tried to mitigate the military attitude by hiring more foreign pilots, that approach doesn't always work either. The foreigner behind the controls of Sunday's flight claims to have been misinformed about wind speed by his Taiwanese co-pilot, authorities on the island say.

The mishap has left analysts shaking their heads and debating which of the region's airlines is the least safe.

"You want somebody worse than that? Go take a look at

Korean Air

," says John Casey, airline analyst for

Dresdner Kleinwort Benson

, of South Korea's flag-bearer, which has suffered through its share of tragedies and was the subject of a blistering internal safety memo written by two of its own pilots earlier this year. Dresdner has no banking relationship with Korean Air and Casey rates the stock a hold. (He doesn't follow CAL.)

Sunday's disaster, unsurprisingly, pushed CAL shares down 7% the day after the crash. It fell again on the subsequent two days and is now approaching its 52-week low of NT$20 (about 63 cents).

The crash came as

Salomon Smith Barney

was doing due diligence on an intended sale of 35.5% of the airline, which would take it out of the control of the government hands. Whatever price it might have fetched for the airline, that price now ought to be lower. Some Taiwanese legislators, angry with the company's seemingly incorrigible ways, have called CAL beyond reform and have argued that it should just be shut down.

Elsewhere in Asia, things aren't as grim. Airline stocks have been beaten up, but as the region's economies rebound from recession their prospects have brightened.

Singapore Airlines

, or SIA, Australia's



Thai Airways

top a list of carriers recommended by

ABN Amro Asia

analyst Andrew Tan. ABN has no banking relationship with any of these airlines.

SIA has a famously strong balance sheet -- it has liquid assets of more than $1 billion -- and service that is the envy of the region. Even though the airline gets plenty of pilots from Singapore's airforce, just like Taiwan and Korea, the company takes a stronger hand in training and supervising them. The stock trades at 19 times trailing earnings, against a market average of 31 times.

Meanwhile, Qantas stands to benefit from increased traffic for next year's Sydney


and trades at just 15 times trailing earnings.

Singapore Airlines is also likely to benefit from the Olympics, though, because of its recent agreement to buy of half of Qantas' competitor,

Ansett Airlines


The cheapest decent airline in Asia is Thai, whose shares reserved for foreigners are trading at 22 times trailing earnings but just 9 times expected earnings. Net profit in the second quarter fell by 90%, helped downward by the government's insistence that Thai continue to fly money-losing domestic routes without raising fares.

The good news is the expectation in the market that Thai probably will sell part of the 93% of shares controlled by the government to one of the members of the

United Airlines



Star Alliance

. That would raise money, and probably bring some much-needed efficiency to operations.

Even under current conditions, Thai's load factor has jumped to 74.4% from 67.7% last year, helped by continuing political problems and occasional violence in Indonesia, a rival destination for Western tourists.

Philip Segal is a freelance writer based in Hong Kong. At time of publication, Segal had no positions in any securities mentioned in this article, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks or funds.