18-Mar-2011 12:10 PM

Carriers outline longer-term knock-on of Japan disaster

The following carriers detailed the following route changes and potential traffic and/or financial impact of the situation in Japan:

  • Air China: Announced it will cancel planned ChengduTokyo Narita and WuhanNarita service, due to start 27-Mar-2011. Both routes were planned to operate twice weekly (Chengdu to increase to three times weekly from Jul-2011). The carrier also stated it is using larger aircraft on Japan services this week;
  • American Airlines:  International VP Kurt Stache stated services operated by the carrier to/from Japan are also "pretty much full in both directions. As long as there’s demand we will continue to fly, as long as it’s a safe environment";
  • Cathay Pacific: Stated travel to Japan is showing declining levels of seat occupancy, while travel in the opposite direction is “persistently high”. CEO Tony Tyler stated: “At the moment, with the extra flights we’ve got, we’ve got enough seats to accommodate all the passengers who want to come back. But we’ll keep a very careful eye on demand and of course if we need to put more flights on we’ll do so. The longer-term financial, economic impact really remains to be seen, but clearly it will probably be something of significance because Japan’s a very important market for us. It’s very different from the old days. Thirty years ago Cathay Pacific got 30% of its revenue from Japan, but that is very, very different of course nowadays. It’s nothing like that, but it’s an important market to us";
  • Jetstar CEO Bruce Buchanan stated demand has held up well despite natural disasters in key markets, including Australia, New Zealand and Japan (The Dominion Post, 18-Mar-2011). The LCC has been monitoring demand and could compensate for any reduction by either reducing service or slowing growth. The airline was continuing to fly its full schedule to Japan. Mr Buchanan remained confident about the Southeast Asian market, which has grown by at least 40% a year for the past two years, with similar growth expected this year. "We haven't seen a significant impact out of the Japanese market," he said. "We carry a lot of leisure passengers so we've got a big business out of Japan into Australia. Therefore it is not impacted by fear of people going into Japan so much." The CEO stated the carrier has more flexibility than network carriers to adjust to any changes. "If you look through the business cycle, the low-cost carriers tend to have more steady performance because they are nimbler. More of their costs are variablised, and they can respond quicker to these changes in demand." However, he stated LCCs were likely to feel the impact of the Japanese disaster later than the full service airlines because of the immediacy with which the larger airlines would have to respond to the business travel segment. Mr Buchanan also did not rule out the possibility of consolidating its operations in Japan. "It's easy for us to bring two flights together that are operating to Australia for instance if demand does change," he said. The carrier is operating service from Narita to Cairns and Gold Coast via Osaka;
  • Finnair: Stated flights are “quite full” in both directions. “We have a lot of Japanese customers travelling home from Europe, and from Japan we have both passengers from Europe and Japanese passengers as it’s their holiday season there,” spokeswoman, Maria Mroue said;
  • Hawaiian Airlines: CEO and President Mark Dunkerley said cancellations have been “pretty modest”. Bookings are mostly handled by travel partners in Japan and they “continue to demand the level of service that we’ve already been providing and intending to provide in the coming months," he said. The carrier stated it would continue its Japan schedule and expansion plans, according to spokesman Keoni Wagner. Meanwhile, Hawaii Governor Neil Abercrombie predicted the economic consequences will be severe for Hawaii. “It’s going to be terrible. It’s going to be rough. It’s something that we have to come to grips with," he said. Hawaii is the top US destination for the Japanese, with more than 1.2 million visitors in 2010 contributing USD1.9 billion or 17% of the economy;
  • Philippine Airlines: Stated it may have to review projections for the fiscal year starting Apr-2011 to consider the impact of the Japan situation;
  • Lufthansa-ANA: Lufthansa CEO Christoph Franz stated Lufthansa’s planned alliance with All Nippon Airways may be affected by recent events. “Preparations were going according to plan and approval of the competition authorities in Japan was expected around mid-year. This might change due to current developments,” he said;
  • Malaysia Airlines: MD Tengku Datuk Azmil Zahruddin said the earthquake adds to the aviation industry's challenges for 2011 even though its impact would not be as severe as the Iceland volcanic eruption in Apr-2010. He added that it was too soon to determine how the quake will affect carriers' earnings, but will certainly be a factor weighing down profitability come the end of a "challenging" 2011. "From an aviation standpoint, the impact to us is probably much lower than something like the ash cloud in Europe, though I do feel bad saying that. That's not to underestimate the disaster itself. Our flights were initially disrupted ... essentially flights are back to normal, but we are monitoring the situation and radiation. Demand is still not as strong as what it was, Europe is still looking quite weak, US is recovering but from a low base, Asia is still okay, but I think with what happened in Japan, the indirect ramifications are uncertain yet. And there are still question marks over short to medium-term demand. That coupled with high fuel prices is something to be concerned about," Mr Azmil said;
  • Philippine Airlines: Stated the situation in Japan could affect the carrier's revenues. "Next year, because of the recent unexpected event in Japan, PAL may need to review its projections," the company said. Japan accounts for 10% of PAL's passenger volume as well as revenues. The carrier is accepting disaster relief supplies for free transport to Japan on space-available basis on any of its regular services to Japan. “This is part of our modest contribution to the international relief effort for the survivors of the March 11 earthquake and tsunami,” President Jaime Bautista said. “Japan is one of our most important markets and this is but a small way of giving back to the affected communities.” PAL will give priority to shipments organised by accredited charities, non-profit organisations and reputable civic groups. PAL is the largest carrier operating between the Philippines and Japan, with 32 flights weekly between six points – daily from Manila to Tokyo, Nagoya and Osaka, fives times weekly to Fukuoka, and six times weekly from Cebu to Tokyo;  
  • SAS:  “To Scandinavia from Japan we’ve had quite full flights with just some seats left,” spokeswoman Elisabeth Manzi said;  
  • Singapore Airlines: Stated it would delay the launch of A380 services to Narita and Los Angeles due to "lesser demand" for travel to Japan. "In view of the developments in Japan, Singapore Airlines is postponing the introduction of Airbus A380 services on flights SQ11 and SQ12 between Singapore and Los Angeles via Tokyo Narita until further notice," the carrier said. The service will continue to be operated with B747-400 aircraft. The carrier had originally planned to launch the A380 service later this month;
  • United Continental: Stated it has had a “measurable decline” in US-Japan travel demand. The change is part of a “modest” drop in Japan travel, spokesman Andrew Ferraro said. United and ContinentalGuam airlines have kept their schedule of 183 weekly departures to Japan except for a route between and Sendai, where the airport was damaged. United Continental is the first major US carrier to say it has noticed a downturn in travel demand to Japan.

Sources from 17-Mar-2011: Xinhua, Bloomberg, Dow Jones, Reuters, Wall Street Journal, Airline Route, Itar-Tass, Gulf News, Singapore Business Times, Huffington Post, NBC Chicago, Fox Business, abs-cbnNEWS.com, Kyodo, IANS, New York Post, Prime-Tass, Bernama, CNBC, Agence France-Presse, LA Times, Post Media

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