Japan Earthquake Sends Tremors Through Airline Sector
Airlines are starting to count the financial cost of the earthquake and tsunami that devastated large areas of northeastern Japan on March 11. The International Air Transport Association has warned of a “major slowdown” for airlines operating in the Japanese market and says that this is unlikely to recover before the second half of 2011. In 2010, the value of air traffic in and out and within Japan totaled $62.5 billion, 17 percent of which consisted of traffic between Japan and the U.S.
On March 22, Delta Air Lines warned that disruption to Japanese services and falling demand for seats could strip $400 million from its profits this year. Delta and many other international airlines have had to contend with issues such as the need to reroute flights to avoid radioactive contamination in the airspace near damaged nuclear reactors and aircrew overnights in Tokyo. At the same time, a gross imbalance has developed between dwindling demand for flights into Japan and insufficient supply to meet demand for those wanting to leave the country.
Carriers such as Japan Air Lines and All Nippon Airways are bearing the brunt of the impact from the disaster. In April they face the prospect of missing out on what would normally be a big month for tourist movements into Japan. European carriers Finnair and Alitalia also find themselves heavily exposed to the situation because almost a fifth of their revenue comes from the Japanese market.
Andrew Herdman, director general of the Association of Asia Pacific Airlines, praised his member carriers for responding quickly and positively in efforts to restore Japanese services.