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SINGAPORE: The global economic slowdown is starting to have an impact on air travel. The International Air Transport Association (IATA) has cut its profit forecast for the airline industry for the second time in four months.
Industry watchers are pointing to the 3 percent dip in Singapore Airline's (SIA) passenger load for February as an indication that there is too much capacity globally, which could further hurt margins.
Experts said 2007 was an exceptional year of growth for the carriers, but the amazing results are not expected to be repeated this year.
An aviation analyst said profit margins will get worse in the second half of 2008.
Shukor Yusof, Aviation Analyst, Standard & Poor's, said: "One factor is the high cost of oil, which is going to be the norm for the rest of this year. Secondly, the weakened US dollar and the effect of credit crisis in the US are beginning to have a domino effect on the rest of the world.
"Asia-Pacific, irrespective of the strength of China and India, is experiencing the negative impact already. We will see more of that in the second half of the year."
Ironically, many carriers ordered planes when the global economy was doing well and these orders are being fulfilled right now, adding capacity at a time when demand is softening.
Albert Tjoeng, Manager, Corporate Communications, IATA, said: "We'll see more aircraft being delivered this year, compared to last year. But the slowdown in traffic makes it more challenging for the industry."
Analysts said Southeast Asian carriers – with the exception of those with strong balance sheets like SIA and Cathay Pacific – will feel the heat.
They believe passengers are going to be facing higher fuel surcharges. But there will come a time when airlines will have to radically restructure the way they set fares and configure the seats.
They will also have to look more carefully at their destinations and cut non-performing ones.
- CNA/so
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