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Air NZ slashes profit outlook
WELLINGTON, New Zealand (CNN) -- Air New Zealand has made more cuts to capacity and downgraded its earnings outlook as the SARS outbreak continues to wreak havoc on Asia Pacific airlines. The New Zealand airline, which had to be rescued from potential bankruptcy in late 2001 by the New Zealand government, said Wednesday it expects its earnings in 2002-03 to fall to NZ$200 million ($112 million) because of the loss of passengers from Severe Acute Respiratory Syndrome (SARS). This represents a decline of 13 percent from earlier estimates. Asia Pacific carriers have slashed services and staff as they struggle to cope with the massive passenger downturns since the deadly flu-like SARS virus first came to notoriety last month. Hong Kong-based carriers such as Cathay Pacific and Dragonair have been among the worst affected, losing more than half their traffic in recent weeks. Singapore Airlines, one of Asia's biggest and most profitable carriers, has laid off 206 cabin crew trainees, cut capacity by nearly 20 percent and deferred possible aircraft purchases. Singapore's government said on Tuesday that visitor arrivals to the city-state plunged 62 percent in the first 14 days of April, with the biggest falls coming from Hong Kong, Thailand, the United States and Japan. Australia's Qantas, another of the region's most profitable airlines, said earlier this month it was cutting 1,400 jobs by June 30 because of the passenger downturn. It had already announced a 20 percent cut in international flights between April and mid-July. Air New Zealand said Wednesday it was canceling its services from May 15 to June 30 between Auckland and the Japanese cities of Nagoya and Osaka. It was also putting smaller aircraft on its daily service to Tokyo. Several flights to Hong Kong and Los Angeles in May and June are also being canceled. The airline said these changes, along with those announced on March 31, represented a 7 percent cut in capacity across its international network. Air New Zealand CEO Ralph Norris said the industry environment "clearly remains extremely volatile" even though the impact from the Iraq war was lower than anticipated. Norris said this volatility meant the airline was revising its earnings for the year to June 30 down to around NZ$200 million before tax and unusual items. While the impact of SARS is being felt most prominently in Asia by the airline industry, other tourist-related sectors such as hotels, restaurants, retailers, cruise ships and ground transport are all being knocked by the business downturn. Regional analysts have already predicted that the SARS virus, plus general global weakness associated with the war in Iraq, will sharply cut GDP growth rates in Asia this year. Some analysts are suggesting Hong Kong -- where SARS has ravaged the economy and caused 99 deaths -- could slip into recession if the disease is not brought under control within a month or two. Morgan Stanley's Hong Kong-based economist Andy Xie said in a commentary on Tuesday that China's decision to cancel the week-long May Day break because of SARS could cut the country's growth rate by 0.2 to 0.4 percentage points. Earlier this month, Xie reduced his forecast for China's 2003 growth to 6.5 percent. That is a sharp contrast to the first-quarter 2003 figure of 9.9 percent announced by the Chinese government last week.
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