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4 May, 2009

A Crisis A Day Keeps Visitors Away

A crisis a day keeps visitors away.

That was the cry of despair in the global travel & tourism industry as it rushed last week to salvage what was left of its tattered and rapidly deteriorating situation.

Even as the industry was dealing with short-term issues like the financial crisis, long-term issues like climate change, it is now dangerously close to going from the frying pan into the fire with the potentially immediate catastrophe of swine flu.

In what has become a standard operating procedure that has been honed to perfection, international travel organisations were urging the industry not to panic and travellers to stay on the road, the temperature scanners were out at the airports, destinations were issuing their updates and advisories, and many travellers had already donned face-masks.

The industry was trying to make sense of conflicting signals from the World Health Organization which on one hand was saying that there was no need to stop travelling even while it was upgrading the alert levels as more cases of swine flu were reported in more countries.

The World Travel & Tourism Council issued a travel alert headlined, “Swine flu: a serious concern, but no cause for panic”.

It said, “WTTC would like to stress that the level of preparedness for such a pandemic within the industry is much better than most people realise, since mechanisms to deal with global health risks have been stepped up considerably since SARS and avian flu last tested the resilience of the Travel & Tourism industry.”

Said WTTC President and CEO Jean Claude Baumgarten, “The present economic uncertainties have already taken a heavy toll on demand across the globe and they will continue to endanger millions of jobs in one of the largest industries in the world.

“The swine flu outbreak is compounding the ailments of the global economy just as there are signs it might be starting to stabilise, darkening the outlook for everything from tourism to world trade. While nobody knows what the implications of a potential pandemic would be, a study commissioned by WTTC after the outbreak of SARS from its research partner Oxford Economics suggests that the impact could be severe and prolonged.”

He added, “The situation is admittedly one causing serious concern, and the industry must act responsibly, but there is no need for panic.”

The International Air Transport Association (IATA) also announced that airlines are prepared for the heightened level of alert. It said IATA has worked with the World Health Organisation to prepare guidance materials for front line staff at airlines, including cabin crew, maintenance workers, cleaners, passenger agents and cargo/baggage handlers.

Giovanni Bisignani, IATA’s Director General and CEO, said “years of planning for the possibility of avian influenza have prepared the industry to deal efficiently with the unfolding situation by following the recommendations of WHO.”

He added, “Safety for passengers and crew is our top priority. People getting on planes should be reassured of two things. First, even under normal circumstances, airlines have equipment and measures in place to keep the cabin environment safe. For example modern aircraft have air filtration systems similar to those in hospitals, aircraft are regularly disinfected as part of normal cleaning routines and crew are trained in handling procedures for passengers who might become ill on board aircraft.”

Although both IATA and WTTC reminded travellers of the fact that WHO is not calling for any restriction of regular travel or closure of borders, Mr Bisignani did note the potential for confusion stemming from governments making reactive adjustments to immigration procedures.

“It is still too early to judge what the impact of Swine Flu will have on the bottom line. But it is sure that anything that shakes the confidence of passengers has a negative impact on the business. And the timing could not be worse given all of the other economic problems airlines are facing,” he said.

“Like the rest of the economy, recovery in the air transport sector rests on a rise in consumer confidence and consumer spending. Shedding debt will be a major headwind. US households, for example, are leveraged at 130% of annual income. Even bringing this down by 5% erases US$500 billion in consumer spending. The challenge for governments is to turn stimulus funds into spending that fuels trade,” said Bisignani.

The airline industry is expected to be significantly hit as people just wait and see.

IATA’s figures for March alone showed that scheduled international traffic. Passenger demand fell to 11.1% below March 2008 levels. Airlines cut international passenger capacity by 4.4% resulting in an average load factor of 72.1%. This is 5.4 percentage points below the average load factor recorded in March 2008. Freight demand was relatively stable at -21.4% compared to March 2008.

“The global economic crisis continues to reduce demand for international air travel,” said Giovanni Bisignani, IATA’s Director General and CEO. IATA estimates that international revenues in March will be impacted with a decline of up to 20%. “Airlines cannot adjust capacity to match demand. Load factors have dipped sharply from last year. All of this is hitting revenues hard,” said Bisignani.

In terms of destinations, the U.S. is expected to be the worst hit. Indeed, visitor arrivals to the U.S. were in a free-fall even before the crisis began.

The Office of Travel & Tourism Industries (OTTI) cited Department of Commerce figures as showing a 12% decline in international arrivals to the U.S. in February, to a total of 2.9 million. Total visitation year-to-date 2009 was down 10% from the first two months of 2008. International visitors spent $10.1 billion during the month, down 13% from February 2008.

The OTTI reported that in February 2009, Canadian visitation declined 9% compared to February 2008 (six months of consecutive decreases). At the same time, land arrivals (540,000) decreased 8% and air arrivals (554,000) decreased 10%.

Visitation from Mexico (traveling to interior U.S. points) totaled 328,000, decreasing 21% in February 2009 (nine months of consecutive decreases). For the month, land arrivals (248,000) decreased 18% and air arrivals (79,000) declined 29%. Overall, traffic for the year was down 13% with land arrivals (557,000) down 8% and air arrivals (174,000) decreasing 23%.

The OTTI said visitation from Asia decreased 15% in February and 12% year-to-date. Japanese visits were 10% below the February 2008 visitor level, and down 11% for the year. Japan accounted for 64% of all Asian visitors for the month and 56% of Asian visitors for the year.

Visitation from South Korea, China and India declined 26%, 13% and 18%, respectively, in February 2009. So far in 2009, arrivals from South Korea and India declined 21% and 14%, respectively. U.S. visitation from the Middle East decreased 5% in February 2009 and 4% year-to-date.

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