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airlines are reducing capacity to and from Japan in response to declining
demand that has followed the tragedy there. Though cuts in service have been
characterized as short-term, the crisis' impact on airline finances and
longer-term passenger demand is as yet unknown. Some airline executives and
analysts, however, expressed optimism for a rebound later in 2011.
the next two to three months, we will undoubtedly see some fairly significant
drop-off in demand and drop-off in booking," said Delta Air Lines
president Ed Bastian last week during a J.P. Morgan investors conference.
"We also expect over the balance of the year, as the country rebuilds, as
the government brings the money to pour into the economy and attract business
and get the economy moving and the rebuilding effort underway, there is going
to be a fairly significant demand pickup. Our expectations at the present time
is that this is somewhere between a six-to-nine-month one-time event."
airline capacity to Japan from all regions in April will be down 2 percent
compared with this month and largely flat from April 2010, according to airline
schedule data pulled for BTN this
week by OAG.
and Delta have made what they described as temporary cuts to Japan services,
United-Continental Airlines at press time had not announced adjusted schedules.
demand," American from April 6 through April 26 will suspend a daily
Dallas/Fort Worth-Narita flight and its recently launched New York–Haneda
service. "During the suspension, American and its Oneworld partner, Japan
Airlines, will continue to serve Narita from [New York] JFK, with one daily
flight each, and American will continue to operate one daily flight to Narita
from DFW," according to a carrier statement issued on Wednesday.
has the largest Japanese presence of any U.S. carrier, claimed it would remove
up to 20 percent of its capacity to and from Japan through May, including
suspension of services from Detroit and Los Angeles to Tokyo's Haneda airport.
Bastian cited "demand weakness." Delta also plans to delay the April
6 launch of nonstop flights between Tokyo Narita and Guangzhou, China, to July
5 in response to the crisis.
continues to operate nonstop service between Japan and every city in the U.S.
and abroad that was served at the time of the March 11 earthquake," the
carrier noted on Monday in an updated advisory.
dominant Japanese carriers largely have maintained service between Japan and
U.S. business markets, though Japan Airlines between April 6 and April 27 plans
to cut capacity "on a portion of its international routes by decreasing
flight frequency and switching to smaller aircraft," according to a
company statement. JAL, which this week emerged from the Japanese equivalent of bankruptcy protection, will cut 74 weekly flights on 11 international routes,
including those from Tokyo to Beijing, Hong Kong, Honolulu, Seoul and Shanghai.
It will also use smaller aircraft on certain routes. Those cuts, JAL claimed,
would help it "to secure profitability as travel demand decreases."
number-two airline, All Nippon, has "not announced any capacity changes to
its international service to Japan," according to a spokesperson.
"However, we are planning to downsize the aircraft for approximately 80
Japan domestic flights."
overall drop in demand to Japan comes just as the Japanese carriers ready joint
ventures with U.S. partners. Both JAL (with American) and ANA (with
United-Continental) have been cleared to begin antitrust-immune cooperation,
effective April 1. Deutsche Bank analyst Michael Linenberg in a
research note suggested those joint ventures could serve as "an
effective means to rationalize capacity" to and from Japan.
Demand Recovery And Financial
executives and analysts expressed optimism that air travel demand to and from
Japan would bounce back within a matter of months. In a research note issued on March
16, Morgan Stanley analyst William Greene cited the
International Air Transport Association chief economist Brian Pearce in noting
that "air travel demand has historically been quite resilient to demand
shocks by natural disasters." Greene suggested the potential for a
"V-shaped recovery" in which demand snaps back and quickly as it
Rose & Co. analyst Helane Becker this week in a research note pointed to
earlier precedent: "The earthquake in Kobe disrupted traffic for two
months." Uncertainty about the extent and duration of the nuclear crisis,
of course, could make this time different than previous natural disasters.
March 18 claimed it was "too early to assess the long-term impact of the
Japanese tragedy on the global air transport industry." The organization
estimated that the Japanese aviation market represents nearly 7 percent of
global traffic and 10 percent of global revenues, or $62.5 billion. "A
major slowdown in Japan is expected in the short term," according to IATA
director general Giovanni Bisignani. "The fortunes of the industry will
likely not improve until the effect of a reconstruction rebound is felt in the
second half of the year."
about 8 percent of Delta's systemwide revenues touching Tokyo, the carrier has
the most exposure of any U.S. carrier to the Japanese market, and the disaster
could cost it between $250 and $400 million in lost revenue this year, Bastian
estimated. He expected the carrier to report a $50 million revenue hit for the
first quarter alone.
carriers have provided fewer details on the financial impact. Deutsche Bank
analyst Mike Linenberg in a March 15 research note wrote that
United-Continental had the second-largest exposure among U.S. carriers to
Japan, with an estimated 5 percent of 2010 sales touching Japan, followed by
American with an estimated 3 percent.
Cleared For Takeoff
World Health Organization, the International Civil Aviation Organization and
other United Nations bodies have "confirmed that there are no restrictions
to normal air transport operations at Japan’s major airports, including both
Haneda and Narita," according to IATA.
U.S. State Department on its travel alerts page, however, "strongly urges
U.S. citizens to defer travel to Japan at this time and those in Japan should
consider departing." The State Department did not explicitly forbid travel
to Japan, noting "commercial flights have resumed at all airports that
were closed by the earthquake, except Sendai Airport, and commercial seats are
available at the time of this posting."