US credit rating agency Moody's has added its voice to concerns over the impact of the Asian crisis on the airline industry. It argues, however, that US and European carriers may escape the slump relatively unscathed.

Those carriers most heavily dependent on intra-Asian traffic are due to face the brunt of the downturn, with Asiana, Garuda Indonesia, Korean Air, Malaysia Airlines and Thai marked out as likely to "-face significant difficulties". Moody's adds that, unlike European and US airlines, these carriers have little opportunity to reposition their largely widebodied aircraft on to domestic networks or to source new international markets.

"Moody's anticipates greater numbers of new aircraft cancellations/deferrals and returns of older aircraft to lessors than have occurred to date," says the report.

The report also questions whether the collapse of Asian currencies, which has pushed up dollar fuel and aircraft costs, will help increase tourist traffic in the region. Moody's says that early evidence from the US leisure industry reveals that travellers "-are not flocking to book Asia, despite heavy discounts on flights and hotels". It also notes that few of the Asia-Pacific carriers outside Australasia have an active currency hedging programme. New traffic that does come into the region is expected to benefit foreign carriers first.

Moody's, one of the world's leading rating agencies, believes that airlines based elsewhere should be able to avoid the worst of the Asian downturn. It points out that half of the world's 20 busiest passenger routes are on city pairs within Asia, while no more than two are on US or European routes into Asia.

Among the major US carriers, American and Delta Air Lines have a tiny exposure to the region, representing less than 3% of sales. Although Northwest and United Airlines' sales were higher, at 20-25%, about half of this is accounted for by flights to Japan.

In Europe, British Airways counts on close to 25% of its profits from the Far East and Australia, but only around 10% is estimated to be at risk in the worst affected areas. Lufthansa also has about 18% of passenger sales on routes to the region and 30% for cargo, although about half of this is based on the relatively stable Japan-Germany freight market.

In the longer term, Moody's believes that there could be a positive impact if the downturn slows capacity growth. "In a year or two, depending on the recovery of the area, we could see higher yields than would have otherwise existed," says the report.

Source: Flight International