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Japan crisis to cause 'major' short-term slowdown: IATA

21-Mar-2011 8:06 AM

IATA issued (18-Mar-2011) its first assessment of the potential impact of the Japan crisis and stated that while it is "too early to assess the long-term impact of the Japanese tragedy on the global air transport industry", the size of the Japanese market means a short-term effect due to the "major" slowdown in Japanese air travel will be felt. Details include:

  • Size of Japan market: Japan’s 83 million passengers per year domestic market (USD19 billion in revenues) is the most exposed. Internationally, the top 10 international markets connecting to Japan are US, China, South Korea, Chinese Taipei and Hong Kong. The most exposed market to Japanese operations is China where Japan accounts for 23% of its international revenues. Chinese Taipei and South Korea are 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 is the most exposed European market at 7%, followed by Germany (6%) and the UK (3%);
  • Economy: The extent to which the travel markets weaken will be largely shaped by what happens to the Japanese economy. Many economists are suggesting that once reconstruction begins the economy will rebound, but the length of the current downturn will depend critically on developments in the nuclear power situation;
  • Fuel: Japan produces 3-4% of global jet fuel supply, some of which is exported to Asia. Some of this refinery capacity has been lost due to damages caused by the earthquake. This supply restriction could lead to higher jet fuel prices. IATA said Japan's airports could run out of jet fuel within 10 days without emergency measures being implemented after vital infrastructure was damaged damaged in the earthquake (Bloomberg, 18-Mar-2011). IATA stated it has briefed carriers on rational procedures that would apply if reserve fall to critical levels.  [more

IATA: “Japan is an important link in global air transport. The USD62.5 billion Japanese aviation market represents 6.5% of worldwide scheduled traffic and 10% of the industry’s revenues. 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,” Giovanni Bisignani, Director General and CEO. Source: Company Statement, 18-Mar-2011.