Airline shares fall again amid flu scare

Airline shares fall again amid flu scare
Comment E-mail Print Share
First Published: Tue, Apr 28 2009. 04 40 PM IST
Updated: Tue, Apr 28 2009. 04 40 PM IST
Geneva / taipei: Global airlines were warned on Tuesday of significant falls in traffic due to the outbreak of swine flu, and their shares took another hit on fears that the fallout could be at least as bad as that of the 2003 SARS crisis.
IATA, the Geneva-based international airlines lobby, said concerns over a possible pandemic from the bug that has killed 149 people in Mexico would compound the misery for an industry already facing its worst financial crisis for decades.
“Anything that shakes the confidence of passengers has a negative impact on the business. And the timing could not be worse given all of the other economic problems airlines are facing,” IATA said in a monthly traffic statement.
Demand has been falling for months as businesses cut costs and tourism feels the pinch from the financial crisis. IATA said traffic fell 11.1% in March from the same month in 2008.
Cargo traffic fell 21.4%, echoing previous months.
Freight demand is considered a key barometer for the health of global trade, which has also weakened considerably in response to the world’s economic downturn and credit crisis.
Airline stocks fell for a second day on Tuesday on concerns about the flu outbreak, but in most cases selling was more muted.
British Airways fell 4% and Air France-KLM -— a combination of two networks that collectively have the largest European exposure to Mexico — lost 2%.
Carnival Corp, the world’s largest cruise ship operator, saw its London-listed shares lose another 6 percent after sinking over 13% in New York on Monday.
In Asia, Hong Kong’s Cathay Pacific, which bore the brunt of the SARS crisis, closed down 0.9% after steep earlier falls, and Air China fell 7%.
Taiwan’s China Airlines and Eva Airways both fell 7% for a second day in one of the markets hardest hit by the SARS outbreak six years ago.
“Airlines are already in a weakened position with the global crisis sapping demand for corporate travel,” said Stone Lin, an airline analyst at Yuanta Securities in Taiwan.
“The summer months of July-September are typically the peak season for most airlines, with most bookings beginning right now. With sentiment so weak, and worsened by the swine flu issue, it’s unlikely anyone is going to go rushing to book holidays or corporate travel, which means the second half of this year won’t be pretty for most airlines,” he said.
IATA, which represents 230 carriers, has said airlines could lose $4.7 billion this year before any impact from swine flu.
But the chief executive of Finland’s Finnair — after unveiling worse-than-expected quarterly losses on Tuesday — said that IATA was too optimistic, and that airlines could lose more than the $8.5 billion they lost last year.
During the SARS outbreak, which began in China and quickly spread to Hong Kong, Taiwan and Singapore, airline traffic in the region most directly affected halved. Airline stocks responded in kind, with carriers such as Cathay, Japan Airlines and Korean tumbling 25% or more.
Comment E-mail Print Share
First Published: Tue, Apr 28 2009. 04 40 PM IST
More Topics: Airlines | Swine flu | Financial crises | SARS | IATA |