This article from NYTimes.com has been sent to you by psa188@xxxxxxxxx /-------------------- advertisement -----------------------\ Explore more of Starbucks at Starbucks.com. http://www.starbucks.com/default.asp?ci=1015 \----------------------------------------------------------/ Even After SARS, Airlines Suffer on Asian Routes August 12, 2003 By EDWARD WONG SAN FRANCISCO, Aug. 11 - The disease had run its course, as far as Peter Chu was concerned. Sure, the respiratory illness known as SARS had sowed fear throughout Asia in the spring. But Mr. Chu was now determined to take his wife, Rose, and 4-year-old son, Michael, back to Taiwan for a visit. "They haven't found a new SARS patient," said Mr. Chu as he and his family waited at San Francisco International Airport on a recent afternoon for a flight to Taipei on EVA Airways, the Taiwanese airline. "So we think there will be no effect on us." But not everyone shares his bravado. Mr. Chu, who moved here three years ago to work as a loan officer for a Taiwan bank, said his older brother and two co-workers had canceled their annual trips back to Taiwan. The summer season is usually the peak period for trans-Pacific travel, when immigrants visit friends and family and tourists flood streets from Beijing to Bangkok. But the region remains far more depressed in terms of air travel than any other part of the world. Passenger traffic plummeted on lucrative trans-Pacific routes at the height of the SARS scare in April and May. It has recovered somewhat - monthly traffic numbers are no longer as far below last year's figures as they once were - but travel across the Pacific continues to lag travel in all other regions. What's more, the Bush administration's decision on Aug. 2 to bar many passengers from catching connecting flights in the United States without having to get entry visas will cut into another source of revenue for some airlines. Industry experts said flights that would be most affected are those passing through this country on trips between Asia and Latin America. Passengers unwilling to go to the time and expense of obtaining a United States visa will probably catch flights that connect through other countries, like Canada. The Air Transport Association, the industry's main trade group in the United States, estimated that travelers connecting through this country under two programs giving them permission to enter without visas accounted for $150 million of revenue last year. While that is less than 1 percent of total industry revenue, the figure will undoubtedly decline just as airlines are scrapping for every dollar they can find. In addition, rising anti-Western violence in parts of Asia, illustrated by the bombing of a Marriott hotel in Jakarta last week, will continue to scare off some tourists. Business travelers are not returning as quickly as airlines hoped, and some who had canceled trips during the SARS scare could decide now that they can continue to substitute telephone or videoconferencing for face-to-face meetings. Though traffic numbers have shown some improvement lately, much of this travel was stimulated by cutthroat deals on plane tickets, so revenue will continue to lag. "Tickets to Taiwan are usually $700 round trip," said Jennifer Wong, a 37-year-old loan consultant also waiting to catch the EVA Air flight here with her two children. "This year, I got a $540 ticket from a travel agent in San Jose. Some friends got deals with hotel stays." Trans-Pacific traffic in July for the major United States airlines was down 13 percent compared with the month last year, said John Heimlich, an economist for the Air Transport Association. That was a far larger drop than the systemwide decrease of 2 percent, though it was an improvement over the decline of about 40 percent at the height of the SARS scare. "At this point, it's as much general malaise as it is residual effects of SARS," Mr. Heimlich said. United Airlines, which relies on Asia travel for nearly a fifth of its revenue and uses San Francisco as its trans-Pacific gateway, reported that its Pacific traffic in July was down 22.1 percent from a year ago. That is a significant improvement over April and May, but still much worse than its 5.7 percent system-wide decline. Richard H. Anderson, chief executive of Northwest Airlines, which is United's main American rival on trans-Pacific travel, said he expected a double-digit decline in passenger boardings in August. "While we've seen recovery, it's difficult to see significant recovery at this point from SARS," Mr. Anderson said. The summer months "are typically the strongest travel months," he added. "But the booking period for June, July and August was right in the middle of SARS." Mr. Anderson said he believed that the real problem with the Pacific slump was the stagnating Japanese economy. He predicted that a true resurgence in travel would not happen until that country recovered. For now, he said, Northwest will reduce capacity by using smaller aircraft, a practice it began during the SARS scare. The airline has also reduced capacity by offering fewer flights on some routes. Between its hub in Minneapolis and Tokyo, for example, it is operating 7 flights a week instead of 10. It has stopped flying between Osaka, Japan, and Honolulu altogether. "We're not to where we were by any measure," Kurt Ebenhoch, a Northwest spokesman, said of the Pacific service. Foreign airlines are among those hardest hit by the summer travel slump. The International Air Transport Association, the largest trade group for overseas airlines, said last week that preliminary June traffic numbers showed a 35.8 percent drop for the Asia-Pacific region from a year earlier. Worldwide, traffic is down 11.8 percent. Because air fares around the world - and especially those to Asian destinations - are so low, any increase in traffic will not mean a proportional increase in yield, or revenue per passenger for each mile or kilometer flown. "Even the most optimistic scenario for a robust traffic recovery will not see yields returning to normal for some time," Giovanni Bisignani, chief executive of the International Air Transport Association, said last week in a speech in Hong Kong. It was appropriate that Mr. Bisignani was spreading words of caution while in Hong Kong. Travelers shunned the city after SARS cases surged there in the spring. Last week, Cathay Pacific Airways, the airline based in Hong Kong, said it lost $159 million in the first six months of the year on revenue of $1.6 billion - its worst half-year performance ever. It parked 22 planes during the SARS scare and has kept four of those on the ground. The airline has returned to a normal schedule on many routes, but offers only half as many nonstop flights between Los Angeles and Hong Kong. Cathay is one of several airlines offering deep discounts on tickets to Asia. Earlier this summer, it was selling its All-Asia Pass - a round-trip ticket from the United States to Hong Kong and onward to as many as 17 cities - for $699, down from $999. In July, the airline offered a $499 round-trip fare between the United States and Hong Kong. Singapore Airlines has also cut rates. In mid-May, it began offering a $599 round-trip fare from North America to Bangkok and Bali, with a five-night stay in a five-star hotel. While such sales have spurred travel among bargain-hunting vacationers, they have done little to get the most profitable passengers, business travelers, back on the planes. "The higher end has been slower to respond, with first-class being the most sluggish," said James Boyd, a spokesman for Singapore Airlines. Airlines, meanwhile, are groping for a way to retain foreign travelers who pass through the United States on their way to other countries - for example, someone changing planes in Los Angeles while flying from Tokyo to Toronto. Before Aug. 2, these travelers did not need a visa from the United States. Now, because of suspicion that terrorists could use this exemption to enter the country illegally, travelers who would usually need a visa to visit the United States have to go to a consulate or embassy abroad for a face-to-face interview to get a visa for their brief stop. That could lead foreign passengers to book flights that connect through other countries instead, or cancel their trips altogether. Such travelers accounted for only 0.3 percent of the total revenue of $56 billion among major United States airlines last year, according to the Air Transport Association. But Mr. Heimlich, the industry economist, noted that "it's another 0.3 percent you have to make up for in cutting expenses." Mr. Anderson, the Northwest chief executive, estimated that his airline would lose millions from the suspension of the programs. What's more, the change may hurt airports, as restaurants, gift shops and other concessionaires lose the money that such travelers would have spent while in transit. Mary Jersin-Shammas, a spokeswoman for Cathay Pacific, said her airline had to reroute a resident of Mexico who was scheduled to fly back from Hong Kong to Mexico City via Los Angeles. The man was instead booked on a flight going through Vancouver, she said. Terry Trippler of Cheapseats.com, an online travel merchant, noted that United Airlines runs flights between Hong Kong and Mexico City with a stop here. Passengers wanting to fly between those cities without having to get a visa just to connect could book a Hong Kong-Mexico City flight on Air France that goes through Paris, he said. "I've been in the business for 35 years, and we've always had transit without visa," Mr. Trippler said. "Then it changed in two hours. I know they've made a lot of mistakes, but these poor network carriers are just getting hit every time they turn around." So how much worse can it get? Some scientists are predicting there could be a resurgence of SARS this fall or winter. http://www.nytimes.com/2003/08/12/business/12AIR.html?ex=1061695343&ei=1&en=8a8008dd91d81205 --------------------------------- Get Home Delivery of The New York Times Newspaper. Imagine reading The New York Times any time & anywhere you like! 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