When it rains, it pours, and the Asian airline industry has experienced a monsoon of late. First was the worldwide economic downturn, then the Iraq war. Now, SARS is taking its toll on the Asian market. The deadly flu-like virus has infected more than 1000 people in Hong Kong and killed 35 in the area, making China the hardest-hit of all countries affected by the mysterious bug. As a result, Asian airlines are feeling the crunch, as passenger loads plummet in response to fear of exposure to the disease. The World Health Organization’s recent call to avoid the region didn’t help much either. Cathay Pacific could consider grounding its entire fleet if passenger numbers continue to plummet, while Singapore Airlines is pondering cuts to staff and capacity in response to the outbreak. [more] In a leaked Cathay Pacific memo, which was published on a Hong Kong Web site over the weekend, company officials said Cathay Pacific’s passenger numbers had fallen from 39,000 to 7000 a day. The Courier-Mail reports a senior executive said the airline was “hemorrhaging cash” at the rate of $6 million a day. Publicly, a company spokesperson downplayed the gravity of the situation. Last week, Singapore Airlines warned it may cut jobs for the first time in 20 years if SARS, and the Iraq war, continue to cut deeper into travel demand and its already low-level earnings.
SARS Cripples Asian Carriers
Key Takeaways:
- The Asian airline industry is facing a severe crisis due to a confluence of the global economic downturn, the Iraq War, and primarily the SARS outbreak.
- Fear of SARS exposure and a WHO travel advisory have caused passenger numbers to plummet, leading to significant financial losses for airlines.
- Airlines like Cathay Pacific are "hemorrhaging cash" at $6 million a day and considering grounding their entire fleet, while Singapore Airlines contemplates its first job cuts in 20 years and capacity reductions.
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