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Airlines May See $10-Billion Loss as SARS Takes Its Toll

May 06, 2003|From Bloomberg News

GENEVA — The world's airlines will have losses of $10 billion this year as passengers avoid flying after the outbreak of severe acute respiratory syndrome, or SARS, in Asia, the International Air Transport Assn. said Monday.

IATA predicts the losses -- $4 billion on U.S. domestic routes and the balance on international routes -- will be worse than those triggered by fighting in Iraq, said Giovanni Bisignani, IATA's director general.

"The impact [of SARS] has been much, much greater than what happened in the Iraq war," said Bisignani, who estimates global industry losses will total $30 billion since the Sept. 11 attacks.

"The last three years have been the worst since civil aviation started, he said."

The outbreak of SARS has infected more than 6,580 people and killed more than 460 worldwide since it was first reported in China two months ago. China, which has reported 60% of the global cases, has quarantined thousands of people in an effort to stop the spread of the respiratory virus.

Passenger volumes "dropped dramatically" because of the virus, said Bisignani, adding that numbers fell as much as 60% in Hong Kong, 40% in Singapore and Seoul and as much as 37% in Beijing and Kuala Lumpur.

In areas that haven't been affected by SARS, he said, passenger numbers have fallen 10% to 15%.

Nine of the largest U.S. carriers, including AMR Corp.'s American Airlines and UAL Corp.'s United Airlines, have posted $3.56 billion in losses for the first quarter, which typically is the worst of the year.

Of those, only Southwest Airlines Co. had a profit. U.S. Airways Group Inc. has yet to report results.

SARS and the war in Iraq probably will mean a deterioration in results for Asian and European carriers compared with last year, while U.S. industry losses aren't expected to be as bad as in 2002, said Goldman Sachs analyst Glenn Engel.

"In 2003, I would expect modest improvement in the U.S. and the rest of the world is likely to show a worse year," Engel said.

Cathay Pacific Airways Ltd., Asia's fifth-biggest carrier, said it will cut its final dividend by half, saving about $120 million, after the SARS virus sparked the biggest plunge in bookings in the airline's 57-year history.

IATA, which represents 277 airlines, has called on governments to cut landing fees and air traffic control charges in an attempt to reduce airline costs at airports during the SARS crisis. Singapore, Malaysia, Thailand, the Philippines and Taiwan have already agreed to help, Bisignani said.

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