Airlines and Shipping Industries on Path Towards Recovery

Air travel and shipping industries are relieved from the shock of SARS (Severe Acute Respiratory Syndrome), and have begun to revitalize.

Airline industry sources reported yesterday that Korean Air resumed its Incheon-Dubai routes, which were suspended due to the war in Iraq. It will reopen its flights to Cairo beginning July 21. Also, the Incheon-Nagasaki route, suspended after diminished demand in the wake of the war, will resume again today.

Asiana Airlines will double its flights to Singapore, where the SARS outbreak has subsided, to four times a week starting next month. The Taipei-Bangkok route will reopen next month.

Asiana Airlines is considering restarting eight China-bound routes within July as the threat of the deadly epidemic has died down and students, who were studying in China, are planning to return to school.

The rising travel demand in this month has surely brought about optimism to airlines.

Hana Tour, the major travel agency, made ticket reservations for 7,600 clients in the first week this month, which exceeds the total number of reservations during the whole month of May. Web Tour, an online travel agency, attracted over 200 this month, who are planning to backpack overseas either in July or August. The figure showed a recovery to a 90% level of last year.

Currently, flight reservation rates have recovered to the 80-90% level, except for China-bound air tickets, which stand at 40%.

Jang Geun-ho, an analyst at Kyobo Securities, said that “it still remains to be seen whether the airline industry will become fully revitalized to the level of last year, even though it shows signs of recovery as uncertainties surrounding SARS and the Iraqi war get cleared.”

Korea`s shipping industry, have enjoyed good business last year, and began to slow down since early this year due to rising oil prices as well as shrinking transported goods. Recently, however, the volume of goods transported has drastically grown and shipping fares went up in great demand, which brought the industry long-forgotten happy smile back.

Hyundai Merchant Marine (HMM) and Hanjin Shipping are overcome with joy as their operations between Asia, Europe, North America, and the Middle East are full of cargo. Formerly less busy routes between Asia and the Mideast are now running with full shipments, carrying materials for reconstruction of post-war Iraq.

Fares for the travel season have increased for Asia-North America routes starting this month. The premium will be imposed on Asia-Europe routes starting next month.

A Hyundai Merchant Marine staff said that “the shipping industry will enjoy favorable business for a while since the supply is short for rising transportation demands.”

Shin Hu-sik, an analyst at Daewoo Securities, forecast that “prices for West Texas Intermediate Crude (WTI) can drop further by 15% after July. Prospects for airlines and shipping industries are bright as demand goes up while expenses or oil prices decline.”

Ho-Won Choi bestiger@donga.com