Thu, Jun 05, 2003 page10

• Airlines say demand is recovering

  SUBSIDING FEAR Asian air carriers plan to reinstate flights and restore services throughout the region as governments assure people that SARS is under control

  • BLOOMBERG
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  Singapore Airlines Ltd, Asiana Airlines Inc and other Asian carriers said demand for travel is picking up as fears of SARS subside and they will start reinstating flights cut at the height of the outbreak.

  Asiana, South Korea's second-biggest carrier, said in a statement yesterday it plans to restore flights to Bangkok, Taipei and Singapore next month. Singapore Airlines, Hong Kong Dragon Airlines Ltd and All Nippon Airways Co said bookings are improving, when contacted by Bloomberg News.

  Airlines across the region canceled 1,150 flights since mid- March as demand for travel plunged because of the virus. The cuts, along with war in Iraq, prompted the International Air Transport Association to say airlines worldwide will lose US$10 billion this year. Now, say some investors, the worst may have passed.

  "There's a lot of pent-up demand, especially for business travel," said Mark Tan, an investment analyst at UOB Asset Management in Singapore which manages the equivalent of US$6.8 billion, including Singapore Air stock.

  SARS has killed 770 people worldwide and infected 8,384 since mid-March. China, which accounts for more than three-fifths of the world's cases yesterday reported three new cases and no deaths.

  The World Health Organization lifted its advisories against traveling to Hong Kong and the southern Chinese province of Guangdong on May 23. It took Singapore off its list of SARS-affected countries last week.

  Asiana plans to restart two weekly flights between Bangkok and the southern port city of Busan next month and others to Taipei and Singapore. It may also restore some of its services to cities in China, the airline said.

  "With the threat of SARS abating, we are seeing a slight improvement in reservations," Asiana said. "We are planning to resume flights on some of the routes that had been halted because of SARS."

  Larger rival Korean Air Co said reservations this month are 9 percent lower than a year ago, compared with a 20 percent decline after SARS broke out.

  "We are planning to adjust some of the schedule as we anticipate an increase in travel demand during the summer season," said Korean Air spokeswoman Crimson Lee.

  Japan's two biggest carriers said they expect bookings to improve next month. Japan Airlines System Corp forecast a 20 percent decline in passengers on international flights in July from a year ago, half the decline expected this month, spokesman Kenichi Ando said.

  Rival All Nippon Airways is expecting bookings to fall 30 percent in July, compared with 40 percent last month.

  "We expect overseas passenger traffic to hit bottom this month and last, and we are starting to see a small pickup in demand in July,'' said All Nippon spokesman Yasuo Taki.

  Airlines are offering discounted fares to attract travelers.

  Singapore Air discounted tickets for 44 destinations, including New York, Paris and Tokyo, for passengers who buy them in pairs, while Thai Airways International Pcl will spend 700 million baht (US$17 million) giving away 20,000 free tickets, the Krungthep Thurakit newspaper reported yesterday.

  "The whole intention is to get people to travel again, and the momentum is beginning to pick up," said Wong Hong, the airline's vice president for Singapore.

  Singapore Air will also start "adding capacity in the weeks ahead, in line with the expected rise in demand," said spokesman Teo Lay Cheng. The carrier, which slashed one-third of its capacity because of SARS, sold 60,000 promotional tickets for travel this month.

  Asian airlines don't expect to be making money any time soon, even with a nascent recovery. Singapore Air said on May 21 it will post a fiscal first-quarter loss, while Japan Airlines forecast a Japanese Yen 43 billion (US$360 million loss) for the year ending March of next year.

  JTB Corp, Japan's largest travel agency, said yesterday April bookings for overseas travel slumped 50 percent. The company is counting on family trips to Hawaii, Guam and Saipan in the Pacific to help boost demand in the summer months.

  Cathay Pacific Airways Ltd spokeswoman Lisa Wong said its pickup in bookings "is so minor that it can't even cover our costs yet." The Hong Kong carrier has cut 47 percent of its scheduled flights and only filled one-third of its available seats with paying passengers in April.

  "With the reduced capacity, even if they fill more of the seats now, it's still going to be a decline in profits this year for airlines," said Winson Fong, who helps manage US$2 billion in Asia outside Japan at SGY Asset Management Ltd, including shares in Singapore Air.
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