Airlines face slowdown due to Japan, warns Iata

Reuters/Geneva/Chicago

"A major slowdown in Japan is expected in the short-term,” says Giovanni Bisignani, Iata’s director general and chief executive

The nuclear and earthquake crises in Japan will cause a "major slowdown” for airlines in Japanese markets, and a rebound is unlikely before the second half of 2011, a leading airline industry trade group said yesterday.
The International Air Transport Association (IATA) said in a statement that with the $62.5bn Japan market representing 6.5% of scheduled worldwide traffic and 10% of industry revenues, tough times are in store for airlines with the most exposure to Japan.
"A major slowdown in Japan is expected in the short-term. And the fortunes of the industry will likely not improve until the effect of a reconstruction rebound is felt in the second half of the year,” said Giovanni Bisignani, Iata’s director general and chief executive, in a statement. World airlines have reported lighter traffic into Japan—and heavier traffic out—since last week’s earthquake and tsunami. Fears of nuclear radiation from damage at the Fukushima nuclear power plant later fed health concerns.
For now, however, Japan’s All Nippon Airways and Japan Airlines said there had been no schedule changes in their flights from Tokyo to overseas destinations.
Delta Air Lines is completing more than 90% of scheduled flights, Chief Executive Richard Anderson said in a recorded staff message.
Delta runs more flights in Japan than any other US carrier, and plans to temporarily halt daily flights from Tokyo’s Haneda Airport to Detroit and Los Angeles beginning next week.
Iata said the most exposed international market to Japanese operations was China, where Japan accounts for 23% of its international revenues.
Taiwan and South Korea were almost equally exposed with 20% of their revenues related to Japanese operations, followed by Thailand (15%), the US (12%), Hong Kong (11%) and Singapore (9%).
France was the most exposed European market at 7%, followed by Germany (6%) and Britain (3%).
Earlier yesterday, Deutsche Lufthansa said a sharp rise in fuel costs could hurt its profit, although economic recovery should boost the airline’s revenues and operating profit this year and next.
Japan produces 3%-4% of global jet fuel supply, some of which is exported to Asia, Iata said.
"Some of this refinery capacity has been lost due to damages caused by the earthquake,” it said. "This supply restriction could lead to higher jet fuel prices.”
Other US airlines that fly to Japan—United Continental and AMR Corp’s American Airlines—said they were flying their normal schedules.
"Obviously, loads out of Japan are higher than loads going in, but the majority of our travelers are flying as originally scheduled,” said AMR spokesman Tim Smith.
Airlines shares were broadly higher yesterday with the Arca airline index up 2.27%.