View Full Version : Airlines brace for crash

31st Mar 2003, 01:05
Mon "The Australian" 31/3/02

Airlines brace for crash
By Steve Creedy
March 31, 2003

CURRENT aviation industry conditions are close to a worst-case scenario, and service cutbacks are already more severe than at the time of the 1991 Gulf War, according to a new Australian analysis.

The report by the Centre for Asia Pacific Aviation says there are no signs of short-term relief as airlines reel from falls in demand of up to 25 per cent and Severe Acute Respiratory Syndrome hits traveller confidence in Asia.

It suggests some North American and European carriers have passed "a point of no return" and says airlines are now moving to second-phase risk management involving substantial cutbacks in capacity. "This further exaggerates what is clearly now developing into a near worst-case scenario for the airline industry," it says.

"Recent service cutbacks are already more severe than occurred in the 1991 Gulf War on the back of what is already a distressed industry.

"There is little indication of short-term improvement."

CAPA'S grim assessment comes as markets on Friday ripped $560 million from the value of Qantas after the airline announced cuts to international flying of up to 20 per cent and said its full-year profit would be about 15 per cent below market expectations.

Qantas has reported falls in demand of up to 30 per cent as key routes such as Japan and Europe were hammered by the continuing Iraqi conflict and SARS. But officials emphasised Qantas remained financially healthy and still expected a strong result.

By contrast, the world's biggest carrier, Qantas partner American Airlines, is teetering on the edge of Chapter 11 bankruptcy. The second biggest, United Airlines, is already in Chapter 11 and faces delisting on the New York Stock Exchange after its shares traded below $US1 for more than 30 consecutive days.

United's pilots have accepted a 30 per cent pay cut as United tries to reduce labour costs by $US2.56 billion ($4.3 billion) to help avoid liquidation.

CAPA's report highlights the uneven effects of the war.

While intra-Asian traffic is relatively unaffected by the Iraqi conflict, Asian carriers with a significant exposure to Japan and the US have been forced to cut back.

Qantas, Singapore Airlines and Japan Airlines System have all reported high impact.

Airlines in parts of southern and western Europe with Middle Eastern connections have generally reported a moderate impact. Air France, KLM, British Airways, Swiss and Lufthansa have reduced schedules by between 6 and 10 per cent.

US airlines are badly hit and there is talk of possible direct government financial assistance. "The situation remains very fluid," the centre says. "More announcements of cutbacks are expected in the next few days."

CAPA says fuel prices remain muted but a new surge would add further pain.

PIC: Singapore Airlines 777-200 9V-SRC airbourne from
rwy 01 bne.

Photo: Wirraway