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September 2002 issue

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Financial woes continue

Five of the USA's largest airlines have been downgraded in the credit ratings list published by US-based company Standard & Poors.

Continental Airlines, Delta Air Lines, United Airlines, AMR Corporation (owner of American Airlines) and Northwest Airlines have all been downgraded, indicating the financial community's concerns about their profitability.

United has filed an application with the US government for US$1.8 billion in federal loan guarantees, under a scheme set up after September 11. Other smaller carriers also filed applications for loan guarantees before the deadline expired in June.

Meanwhile, Delta, United and American Airlines added US$20 to the cost of a round-trip airfare in July, although at the time of going to press, other carriers had not followed suit.

American, which prompted the price increase, said the changes applied to the lowest fares in its pricing structure. This was the fourth time that US carriers had tried to initiate a general price rise in the market this year, with each previous attempt quickly being abandoned.

In Europe, the European Commission (EC) has extended a relaxation of regulations concerning government's helping out carriers with insurance costs. Governments will now be able to contribute to costs until the end of October this year.

The EC has also allowed the Italian government to invest US$1.35 billion in Alitalia, although normal state aid is not permitted under European law.

The Commission decided that the Italian government was investing an amount that a private company would consider investing and, therefore, the case could be considered differently.

Private banks are also reported to be investing in the airline, which hopes to be back in profit next year.

Chinese market buoyant

China's flag carrier, Air China, has bucked the downward trend experienced by many carriers, announcing it is on course to make US$31 million in profit this year, despite a setback in April when one of its planes crashed in Korea. In a statement issued by Air China recently, it commented, 'We have undergone a series of safety-enforcing measures and taken efforts to ensure safe operations and boost marketing. Our business operation is showing a sound outlook.'

Although the air travel market in China seems to be flourishing, the Chinese government is enforcing a strict ban on discounts for all airfares issued in the country, according to the Shanghai Morning Post.

Any discounts given by cash, tokens or receipts are reported to be illegal, as are any other perks, and local government police, tax offices and civil aviation departments are all being asked by government departments to help enforce the ban.

US approval for Skyteam's closer ties

The Department of Transportation in the USA has agreed to allow closer marketing ties between US carrier, Delta Air Lines, and Korean Air.

The Skyteam partners will now be able offer new routes, more travel options and better service, according to Delta's Chief Executive, Leo Mullin. Delta had previously gained approval for its North Atlantic operations with fellow Skyteam members, Air France, Alitalia and CSA Czech Airlines.

Mullin explained that all Skyteam alliance partners operated on a network-to-network basis and now, all members could link hub airports at Prague, Milan, Rome, Paris, Atlanta and Seoul. Skyteam is the only alliance with transpacific and transatlantic immunity. However, it is still battling with European competition authorities over plans for a joint venture between Alitalia and Air France. Skyteam's sixth member is AeroMexico.

Travel Update

Ciao Fly has launched a new service between Parma in northern Italy and London's Luton Airport in the UK. The small airline also flies between Parma and Beauvais, near Paris in France. Meanwhile, small Belgian carrier, VG Airlines, set up after Sabena's demise (not to be confused with SN Brussels Airlines) has added New York and Boston to its route network. It also flies to Los Angeles and Yerevan in Armenia.

BMIbaby, the new low-cost airline from BMI British Midland, is planning to launch services from Cardiff in Wales this year to complement its current operations from East Midlands Airport in England.

The American Society of Travel Agents (Asta) has appeared before a US commission to complain of the anti-competitive tactics of US carriers. The association alleges that airlines have used their combined power to cut payments to agents, drive consumers to book elsewhere and denied agents and their customers equal access to all published fares. One central complaint was about Orbitz, the Internet booking portal operated by many major airlines, which allegedly offers much cheaper fares than are available to agents. The commission is due to report its findings this year.

Despite Malaysia's efforts to turn its Kuala Lumpur Airport into a major Asian hub, German carrier Lufthansa has said it is not considering moving from Bangkok or Singapore, its chosen Asian bases. The Malaysian government has waived parking and landing fees for the next five years for new flights launched by carriers from the airport.

Japan Airlines has introduced a new three-times-weekly service between Tokyo in Japan and Xiaman in China. This is the seventh city in China now served by the Japanese carrier.

US carrier, American Airlines, plans to eliminate all paper airline tickets by the end of 2003. The carrier hopes to convert to e-ticketing on all domestic routes by March and all worldwide routes by December.

Aerolineas Argentinas has resumed a London to Buenos Aires service after an absence of five years. Since its dire financial problems last year (see Language Travel Magazine, February, page 9), the carrier has been bought by Spanish company, Grupo Marsans. The three-times-weekly service from London Gatwick competes with British Airway's service from London Heathrow to Buenos Aires.

New Zealand is gaining in popularity as a tourism destination, according to Tourism New Zealand's George Hickton. 'The world appears to be rediscovering New Zealand,' he said. 'By the end of March, international visitors had increased nearly two per cent on the year before - [our] best summer season ever.'

In a bid to compete with low-cost carriers in Europe, British Airways has introduced its promised fare cuts on short-haul routes in Europe. Flights from the UK to France, Italy, Portugal, the Netherlands, Sweden, Norway and Denmark have been reduced by up to 80 per cent, according to the carrier, and advance purchase and Saturday night stay restrictions have been removed.

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