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Asian Airlines Scramble to Cope With Lost Business


The start of the U.S.-led war on Iraq pushed many Asian airlines to cut costs and services in the past few days.

One analyst says corporate travel bookings have fallen as companies face an uncertain business environment. At the same time, tourists are wary of the heightened possibility of a terrorist strike. The war also is keeping fuel costs at high levels.

Mark Webb, an aviation analyst in the Asia investment arm of HSBC Holdings, said "our main conclusions are that generally over Asia there is a 10 to 15 percent reduction in bookings due to corporate canceling of events."

Australia's largest airline, Qantas Airways, cut three percent of its work force, about 1,000 jobs, to make up for the expected drop in business.

Korean Air, one of the world's largest freight carriers, is cutting back on international routes. Japan Airlines applied to regulators to raise domestic fares by at least 10 percent to cope with higher fuel costs.

Hong Kong's main carrier, Cathay Pacific, is rerouting planes flying between Asia and Europe "to keep well away from the Gulf region." The airline, however, says it will continue its Middle East services.

Mr. Webb says that rerouting involves extra costs for longer flight paths and landing and parking fees. In addition, airlines face higher security expenses because of the heightened threat of terrorism.

To cover costs, Singapore Airlines subsidiary SIA Cargo is imposing a "war surcharge" of 25 cents a kilogram for shipments to areas affected by the war.

Hong Kong and Vietnam's main carriers are suffering from additional cancellations due to the spread of a mysterious pneumonia. More than 400 people have been infected around the world, about half of them in Hong Kong. Vietnam also has seen dozens of cases and the United States is warning its citizens to avoid traveling to the country, because its limited health-care facilities may not be able to cope with the disease.

"On an individual basis Hong Kong is suffering far more badly than other destinations, because they're seeing a sort of 35 to 40 percent reduction in bookings," said Mr. Webb.

The World Health Organization issued a rare travel advisory warning airlines to be more vigilant and passengers to avoid non-essential travel to Hong Kong and Hanoi.