Cathay Pacific Airways Ltd may force its 14,000 workers to take unpaid leave and Japan Airlines System Corp wants about 50 flight attendants to do the same as Asian carriers try to cut costs, following a slump in travel demand caused by the war in Iraq and a deadly virus.
Hong Kong-based Cathay, Korean Air Co and other airlines in the region said severe acute respiratory syndrome, or SARS, will harm earnings this year. Asian carriers have cut about 650 weekly flights this month. Some analysts predict airlines will lose money in the second quarter and potentially for the full year.
"Our first-quarter earnings won't be as good as a year earlier because we had to reduce some of our flights," said William Han, a Korean Air spokesman. Cathay Pacific is asking employees to clear their annual leave and take unpaid leave, said spokeswoman Rosita Ng.
Singapore Airlines Ltd, Asia's most profitable carrier, Korean Air and other carriers probably won't follow UAL Corp's United Airlines Inc into bankruptcy. Yet the disease means they are under even more pressure to save money after fewer passengers took to the skies because of war in Iraq.
"The main thing is to cut their operating costs," said Steven Lim, who helps manage about US$270 million at Daiwa SB Investments Ltd. "The stronger ones like Singapore Air and Cathay are strong enough to weather this period, but others may face more financial problems."
Asian airline stocks have slumped. Since mid-March, when the disease spread across the world, the Bloomberg Asia Pacific Airlines Index of 17 carriers have fallen 9 percent. Cathay's shares fell 24 percent for the period, while Singapore Airlines fell 15 percent and Eva Airways Corp's stock is down 12 percent.
Cathay shares closed unchanged at HK$8.80 in Hong Kong, while Singapore Air fell as much as 1.7 percent to S$8.65 in Singapore.
Earnings for EVA Air (
Asiana Airlines Inc, South Korea's second-biggest carrier said first-quarter earnings will be below last year's 24 billion won (US$20 million).
In Japan, All Nippon Airways Co, which analysts predict will report its ninth annual loss in a decade for the year ended March 31, will "see considerable impact for the next business year if the virus continues," spokesman Kazuyuki Iwakata said.
Japan Airlines asked its cabin attendants to take unpaid leave for a month, said spokesman Tatsuo Yoshimura. The company wants about 50 to 60 of its 7,000 flight attendants to take the leave in May.
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