Asian airlines face bleak times

China may slash airfares after the September 11 attacks dampened demand

HONG KONG, China -- Asian airlines have enjoyed one of their best years ever in terms of aviation safety, though that seems the only good news for the industry, with even fast-growing China seeing significant losses following the September 11 terrorist attacks.

China's aviation authority is considering slashing airfares following reports that the country's three major airlines incurred 294 million yuan ($35.5 million) in losses due to the suicide attacks on the World Trade Center and the Pentagon using hijacked aircraft, the state-run China Daily reported on Tuesday.

The newspaper cited unnamed sources in the General Administration of Civil Aviation of China, or CAAC, who said lower costs for aviation fuel might help justify a cut in ticket prices. CAAC imposed a ban on fare discounts in 1998.

Although Asia accounted for about 23 percent of all fatal aircraft accidents from 1991-2000, so far this year only one casualty has been reported by a passenger carrier.

That was a Thai Airways flight attendant who died when a Boeing 737 burst into flames on March 3, minutes before Prime Minister Thaksin Shinawatra and 148 passengers were to board it for a domestic flight to the northern city of Chiang Mai.

COUNTRY PROFILE At a glance: China Provided by CountryWatch.com    CNN.com Asia More news from our Asia edition

According to the international data base of the Aviation Safety Network, the only other aircraft casualties in the region this year have involved military aircraft, including an Indonesian navy plane that crashed in dense jungle in remote Irian Jaya province on January 8, killing all 10 people aboard.

"Asia has been very, very fortunate. Let's pray it continues,"Jim Eckes, an aviation consultant based in Hong Kong told The Associated Press.

By comparison, in 2000 there were several major crashes, including an October 31 crash in which a Singapore Airlines jumbo jet slammed into an object at Taipei's airport before takeoff and burst into flames, killing 81 people.

Money woes

Higher costs for insurance and security and a drop in passenger traffic have compounded regional airlines' woes, with several state-run national carriers -- including Thai Airways, Malaysia Airlines and Philippine Airlines -- each facing debts of more than $2 billion, Eckes told a gathering of Hong Kong executives.

"The next two or three years in Asia will be bleak for the airline industry. The majority of airlines will lose money," said Eckes, managing director of the consultancy Indoswiss Aviation.

Eckes said improvements linked to an expected consolidation of Chinese airlines into three main carriers -- Air China, China Southern Airlines and China Eastern Airlines -- would not show up for another three or four years.

By then, increased travel linked to Beijing's status as the host city for the 2008 Summer Games would likely help boost the number of travelers, Eckes said.

Last year, the Civil Aviation Administration of China transported 67.2 million people, the third-largest passenger transport volume in the world. It expects Chinese airlines to be carrying 100 million passengers a year by 2005.

However, the global economic downturn and the September 11 attacks are taking a bite out of growth even on the Chinese mainland.

The China Daily report cited official documents that said Chinese airlines were carrying only half their daily capacity of 400,000 passengers.