Dip in jet fuel prices likely if flu outbreak echoes Sars

Swine flu could cause a steep decline in jet fuel prices, echoing a plunge of as much as 40 per cent in early 2003 when air travel dropped because of the Sars epidemic.

Jet fuel in Singapore fell to US$26.15 a barrel in April 2003 from US$43.35 a barrel that February.

Travel to Asia fell 51 per cent in May 2003 from the year before, compared with a 13 per cent increase that January, according to air traffic statistics from the International Air Transport Association in Geneva, Switzerland.

Severe Acute Respiratory Syndrome killed 770 people, mostly in Asia. Swine flu has affected at least 40 people in the US and killed 149 in Mexico.

"This is just going to reinforce the mode everyone is in, which is don't travel unless you absolutely have to," said David Kirsch, an analyst with Washington consultant PFC Energy.

"Everyone's scaling back now for economic reasons. Now they'll have health reasons."

Kirsch said the fact that the current scare was coming in the midst of a recession was likely to temper its effect on demand, unless airlines began large-scale flight reductions.

Jet fuel in Singapore is already down 69 per cent from a July high to US$56.45 a barrel.

During the Sars outbreak, Asia-Pacific airlines lost about 8 per cent of their annual traffic over the course of the year, said Steven Lott, a Washington spokesman for the International Air Transport Association.

"The percentage was closer to 50 per cent during the first five months of the year," he said, and caused losses of about US$6 billion.

- BLOOMBERG