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Prospects for air travel not encouraging

DEMAND for air travel could decline further despite signs of a more stable global economy, and prospects of a recovery this year look slim, industry executives said at a meeting of the world's airlines yesterday.

Airlines have been suffering from weaker demand because of the financial crisis and have also been hurt by sharp fluctuations in oil prices the past year.

"I think it's probably going to get worse," Rob Fyfe, chief executive of Air New Zealand, told Reuters in an interview on the sidelines of an International Air Transport Association board meeting in Kuala Lumpur.

The bearish comments contrast with the more positive outlook from some global policy makers and economists about a global recovery in the wake of recent data such as the slowing pace of United States job losses.

Airlines have cut capacity and jobs in response to a slide in profits, and some have delayed or cancelled orders for new aircraft from plane makers Boeing Co and Airbus SAS.

Fyfe said unemployment is still rising and airlines will still need to address excess capacity. The full impact of the downturn will unlikely be seen until the traditionally weak northern hemisphere winter, he warned.

But he said that ANZ is not changing its plane orders or profit guidance for this year.

Lufthansa AG's Swiss unit reiterated the gloomy outlook for the industry, saying that premium passenger and cargo demand had stabilized but prospects of a recovery this year were unlikely.

"Cargo demand has stabilized at a very low level, which is giving good reason for substantial concern for the future of this business," Chief Executive Christoph Franz said. "The same is true for passengers in business and first class. We are not forecasting a miracle in coming months."

More recently, outbreaks of the H1N1 swine flu virus have added to the gloomy prospects for global air travel and tourism.

Industry analysts have warned that any recovery in the sector is expected to be months away, as consumers cut back on air travel for business or holidays and as a drop in global trade hits cargo revenue.


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