Lufthansa Warns Of Cuts, Industry Braces For Flu

Lufthansa announced contingency plans to cut flights and drop routes amid a crisis worsened by swine flu, but global airlines warned governments against overreacting to the outbreak.

Lufthansa, which has been slower than other carriers to reduce capacity because of the economic downturn, said it could cut seats on long-haul flights by up to 8 percent this year if demand continued to deteriorate.

Thursday's comments came as European Union health ministers, meeting in Luxembourg, prepared to discuss coordination of possible restrictions on travel to and from Mexico following the outbreak of swine flu there.

France has said it will ask EU health ministers to suspend all flights to Mexico because of the virus, which has killed up to 176 people in Mexico and is spreading around the world.

A European Commission official said Wednesday EU countries can impose individual travel restrictions but the EU's executive cannot impose an EU-wide ban.

Noting that many governments have already issued travel warnings, the Association of European Airlines said such measures could do more harm than good unless coordinated.

And global airlines body IATA said the World Health Organization had advised against closing borders.

"WHO is the global expert. WHO is not advising any travel restrictions. We hope that governments take decisions and coordinate their actions in line with WHO recommendations," said director general Giovanni Bisignani in a statement.

Most airlines have so far maintained flights as normal, but Spanish carrier Air Europa reduced links with Mexico, saying it would cut charter flights to one from five a week.

Among other major European airlines, Spanish carrier Iberia operates 12 flights a week to Mexico, and Lufthansa flies there once a day. Neither company has so far indicated plans to change that schedule.

Lufthansa's Chief Financial Officer Stephan Gemkow said he expected the impact of swine flu on his own company to be less severe than that of the 2003 SARS epidemic, in the worst case.

"In the best case, the reduction would be zero, but we currently do not see that best case," he said after reporting a higher-than-expected quarterly operating profit.

As SARS spread, Asian air travel collapsed, driving down monthly passenger numbers around the world by up 21 percent, according to IATA.

The flu has spread from Mexico to countries including the United States, Germany, the Netherlands and New Zealand. The World Health Organization has raised its alert level and said a swine flu pandemic was imminent.

Lufthansa said late Wednesday it would place doctors on its flights to Mexico who would be able to detect an infection with swine flu early and treat affected passengers.

In the United States, airlines said demand for flights to Mexico had declined but that operations were normal.

"We've seen a significant drop in demand for travel to Mexico, primarily to beach destinations," said Continental Airlines spokeswoman Julie King, who declined to provide an exact figure.

Major airlines were waiving fees they usually charge to change tickets for travel to Mexico.

Even without the impact of swine flu, airlines have been suffering from weak demand as businesses and consumers cut travel during the recession. World airlines will lose a total USD$4.7 billion this year, IATA said last month.

For now, Lufthansa plans to cut the number of seats it offers on its planes by 1.1 percent this year.

"The environment will remain difficult and the spread of swine flu surely does not help airline businesses either," said MM Warburg analyst Michael Bahlmann in a note.