European, Asian airlines say recovery coming

10.00am

The heads of major Asian and European airlines said on Saturday the slump in travel demand caused largely by the Severe Acute Respiratory Syndrome (Sars) virus had reached its bottom, though recovery from the current industry crisis would be slow.

Airlines worldwide have been hit by a sharp decline in traffic resulting from the sluggish economy, war in Iraq and more recently Sars, which has decimated air travel to Asia.

But airline executives from around the world, all members of airline network Star Alliance meeting in Washington to welcome US Airways into the group, said the demand slump appeared to be leveling off.

"There are indications over the last couple of weeks that the traffic (drop) has bottomed out," Singapore Airlines Chief Executive Officer Cheong Choong Kong told a news conference.

"Barring unforeseen circumstances, I think we have seen the worst."

The leaders of the world's largest airline alliance said they were evaluating ways to reduce costs to offset the industry weakness, adding to measures they have taken individually.

Singapore Airlines is set to cut jobs for the first time in its history because of the decline.

The European airlines, hit by increasing pressure from low-cost carriers as well, also said demand appeared to be on the mend.

"I believe that for most of the European carriersthat we will see a recovery starting now," said Jorgen Lindegaard, the chief of loss-making Scandinavian airline SAS.

Juergen Weber, the head of Germany's Lufthansa, which was the most exposed to Asia of the European airlines, said he expected double-digit growth to China once the Sars virus was under control.

Austrian Airlines Group CEO Vagn Sorensen told Reuters that even as the volume of passengers flying was increasing, yields, or profitability per seat, were still under pressure and may never recover to previous levels as a result of the low-fare airline revolution in Europe.

"Bookings coming in for June, July, August -- that looks better," he added.

Singapore Airlines' Cheong told Reuters that the airline still saw acquisitions as a part of its growth strategy and was considering setting up a domestic airline in Australia.

He said the company would be interested in increasing its 49 per cent stake in British carrier Virgin Atlantic if the opportunity arose and regulations allowed.

- REUTERS