The worst of the SARS-related downturn has passed and the recovery has officially begun, as hard-hit Asia-Pacific carriers begin to report a solid rise in passenger demand.
Carriers across the region were badly hurt from the end of March by the SARS outbreak, forcing them to slash capacity and take drastic cost-cutting action. But business has been picking up strongly since the end of June, leading to hopes that a return to traditional growth levels will soon materialise.
Asian global distribution system company Abacus is already reporting a return to pre-SARS booking levels on routes within and out of the region. It says that with SARS-related travel advisories lifted and the outbreak contained, a rebound in demand is being seen.
Abacus chief executive Don Birch says the recovery has been strongest for intra-Asia and Asia-USA bookings. "The SARS recovery has started, is established and we should return to pre-SARS levels in July as the virus is contained and promotions attract travellers," he says.
"We are entering a stage of recovery that we have seen before," says Birch. "SARS is just another manifestation of a series of events that the industry has had to face head on - be it the events of 11 September, the Bali blasts, political unrest or health scares. History has shown us that the resurgence from such events has three stages: shock, containment and recovery. Right now we are in the recovery phase."
But yields are still badly depressed as airlines offer cheap flight options to lure back travellers. Hong Kong's hard-hit Cathay Pacific Airways said in mid-July that it was close to returning to breakeven. However, it added that while business has been improving as demand recovers, heavy price discounting has had a negative effect on yields, which are "still critically low".
One issue airlines have had to address is how much capacity to restore. Singapore Airlines, which cut around a third of its services, has been coy about when it will bring them back. Analysts say that this is because the airline was demanding pay concessions from employees, which it got.
Cathay cut around 45% of its scheduled flights in June but has been steadily adding capacity. It said it expected to be operating around 70% of its normal schedule by the end of July and 90% in August. By the end of September it expects to return to a full schedule.
"We have two options: to either follow a conservative approach and only restore truly profitable services or restore them all as quickly as we can," says Tony Tyler, director corporate development. "We have gone for the second option."
Airlines in other parts of Asia such as China, Japan, South Korea and Taiwan are also steadily reinstating services. Thai Airways, for instance, is seeing a pick-up and adding services to its Europe, Middle East and US routes. Airlines in China, which were particularly hard hit, expect the Chinese market to return to pre-SARS levels in August and return to growth levels in September.
But as of mid-July, Australia's Qantas Airways, which was the hardest hit of Australasia's airlines, had not restored any of its Asian cutbacks. Instead it brought North American flights back to pre-SARS levels.
Its low-cost international leisure unit, Australian Airlines, has been adding Asian routes and shifting from inbound to a more balanced strategy, however, reflecting stronger bookings by Australians than by Asians.
Air New Zealand (ANZ) escaped SARS with barely a scratch, thanks to routes that avoided Asia and quick cutbacks in its Asian capacity. Now that carriers are slashing fares to stimulate a rebound, ANZ does not believe it needs to match them.
NICHOLAS IONIDES SINGAPORE AND DAVID KNIBB BRISBANE
Source: Airline Business