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KLM traffic hit by SARS
AMSTERDAM, Netherlands (Reuters) -- Dutch airline KLM said on Wednesday its passenger traffic fell 10 percent in May as the SARS virus wiped out more than a third of its traffic on key Asian routes. Yet the market, still cheering positive comments from rival Lufthansa at the weekend, took the news to its stride, and the KLM shares extended their recent gains amid relief at signs that SARS may have peaked. The stock rose four percent to 6.91 euros at 0940 GMT, bringing total gains to 15 percent over the last six sessions. Europe's fourth largest airline, which has the continent's largest exposure to Asian destinations, said passenger traffic on routes to the region fell by 35 percent, but Middle East traffic was recovering after the end of the war in Iraq. "The problem with SARS is that it came unexpectedly, making it impossible for airlines to adjust their capacity in time,'' said Maarten Bakker, analyst at Fortis Bank. "But SARS should be considered a one-off factor, especially since we are seeing the number of new cases declining.'' On Monday, China reported no new SARS cases for the first time in at least six weeks, a clear sign that the disease is on the retreat in Asia. But the World Health Organisation, pointing to a renewed outbreak in Canada, warned China region that the virus was proving hard to eliminate. SARS, or Severe Acute Respiratory Syndrome, is the latest ailment plaguing the airline industry, already suffering from a worldwide economic slowdown, fears of fresh hijacking attacks and increasingly brutal competition from no-frill carriers such as RyanAir and EasyJet. Contrasting pictureOn Tuesday, KLM Chief Executive Leo van Wijk told Reuters business in the first quarter ending June had so far been ``lousy'' and he did not see significant signs of recovery. His comments, however, contrasted with a more bullish statement from Lufthansa Chief Executive Juergen Weber, who told Reuters on Sunday the worst may be over for the battered industry and that it had brought idle planes back into service. KLM said it cut 12 percent of its capacity to Asian destinations in May. Its overall passenger load factor, or the percentage of filled seats, fell 3.5 percentage points to 73.7 percent in the month. On the bright side, its cargo load factor increased by 2.3 percentage points to 71.9 percent. It plans to axe at least 3,000 jobs as part of a big cost-reduction programme after it reported a record loss in the fiscal year ending in March. European airline shares, including British Airways and Air France, have regained ground in the recent sessions on signs that SARS was on the retreat. Yet despite the recent rebound in the KLM share price, its market capitalisation of 313 million euros is still less than the cost of two of its 22 largest Boeing aircraft.
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