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Airlines Woes Spread


Global airline woes hit the Asia-Pacific

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May 05, 2008

NEW International Air Transport Association figures suggest the malaise affecting the US airline industry may be spreading to the Asia-Pacific.

IATA's March traffic figures show that global traffic growth in March was down to below 4 per cent when adjusted for the early Easter break, with passenger loads down 1.7 percentage points on last year to 76.1 per cent.

This was about half the pace seen in late 2007 and continued a sharp downward trend which began in December as the US credit crunch began to affect the airline industry.

But despite the focus on US economic problems, IATA found the biggest falls in passenger traffic in March were for airlines in Africa, the Asia-Pacific and the Middle East.

Growth in the Asia-Pacific dropped to 4.3 per cent in March, compared to the year-to-date figure of 5.9 per cent.

IATA said the fall was significant given that the region's booming economies were expected to immunise it from a US slowdown.

"Slower growth in the passengers carried by Asia-Pacific airlines is of more concern, since this is a region where travel demand is expected to continue to grow, even in the face of a US recession," it said.

Freight growth in the region also remained sluggish at 1.7 per cent for the month.

Ironically, North American traffic grew 6.3 per cent as airlines shifted from low-yielding domestic routes to international markets and took advantage of a strong competitive position stemming from a weak US dollar.

But figures from other regions saw Middle East growth slow from last year's 20.4 per cent to 15.4 per cent, African carrier traffic contract 4.3 per cent and European growth at just 3.7 per cent.

The figures prompted IATA director general Giovanni Bisignani to warn that the fortunes of the industry had taken "a major turn for the worse".

"Astronomical oil prices are hitting hard and the buffer of an expanding economy has disappeared," he said.

The traffic figures came as Goldman Sachs JBWere downgraded Qantas from buy to hold as it factored in rising oil prices.

Analysts Matthew McNee and Alicia Chew said in a note that they opted for the downgrade despite the potential gains from the proposed spin-off of the frequent flyer program and the airline's "attractive" fully franked yield.

"With oil prices continuing to track above our revised forecasts, increasing competitive pressures in the domestic market and concerns over weakening consumer confidence, we believe the Qantas share price will continue to trade at the lower end of its historical price/book range."

theaustralian.news.com.au

Global airline woes hit the Asia-Pacific
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