Lufthansa CEO ‘Shocked’ by Japan Nuclear Emergency as BA Crews Leave Tokyo

Deutsche Lufthansa AG (LHA) said today that the earthquake, tsunami and nuclear crisis in Japan have left the airline industry in shock, as British Airways became the latest carrier to pull crews out of Tokyo and Cathay Pacific Airways Ltd. (293) reported plummeting travel to the country.

“The natural disaster in Japan has left us all in deep shock,” Lufthansa Chief Executive Officer Christoph Franz said in a speech in Frankfurt, its main hub. “We are extremely worried about the situation and the magnitude of the tragedy.”

Lufthansa was the first major carrier to reroute flights away from Tokyo amid fears of radioactive fallout from nuclear plants damaged following last week’s earthquake. The carrier will divert services south to Osaka and Nagoya through the weekend at least, Franz said. Italy’s Alitalia SpA reiterated that it’s also flying to Osaka to avoid the Japanese capital.

Hong Kong-based Cathay, Asia’s third-biggest airline, said in an e-mail that trips to Japan are showing declining levels of seat occupancy, while travel in the opposite direction is “persistently high.” United Continental Holdings Inc. (UAL), the world’s biggest airline, said yesterday it has seen a “measurable decline” in demand for trips from the U.S. to Japan.

Cathay, Korean Air Lines Co., China Southern Airlines Co., Asiana Airlines (020560) Inc. all say they’ll boost capacity from Tokyo as Japan pares power usage and tackles radiation leaking from the Fukushima Dai-Ichi plant 135 miles to the north. Japan Airlines Corp. and All Nippon Airways Co., the nation’s two biggest carriers, declined to comment on demand for flights.

‘Adjust Supply’

Airlines may begin cutting capacity to Japan if diminishing demand suggests a structural change, said Chris Logan, an analyst at Echelon Research & Advisory in London.

“If Japanese inbound traffic is affected more than just short term, airlines can adjust supply to mitigate any profit impact,” Logan said.

British Airways said today that it will swap crews in Hong Kong, joining other European carriers in taking steps to avoid having staff spend the night in Tokyo as the nuclear alert intensifies. While the U.K. company will continue to serve the city, customers traveling up to March 21 can cancel and claim a full refund, and tickets through April 10 can be rebooked for a later date for free, spokesman Tony Cane said in e-mail.

A380 Delay

Singapore Airlines Ltd. (SIA) also joined the ranks of operators adding stops on Japan services to avoid having crews overnight in Tokyo, with staff changing in Osaka, and said it will delay introducing the Airbus SAS A380 superjumbo on its Los Angeles route, which has a stop-off in Tokyo, until further notice.

Qantas Airways Ltd. (QAN) budget unit Jetstar also added a halt in Osaka, while Air France is continuing to route its twice- daily Tokyo service via Seoul, spokeswoman Brigitte Barrand said. Virgin Atlantic Airways Ltd., which competes with British Airways at London Heathrow, is still basing crews in Tokyo, though the situation is under “constant review,” according to spokesman Greg Dawson.

“Airlines are all taking a slightly varying approach,” said John Strickland, an aviation analyst at JLS Consulting Ltd. in London. “It’s operationally difficult to add another stop, but it’s better than not being able to operate at all.”

‘Perfect Alignment’

Lufthansa Chief Financial Officer Stephan Gemkow said the situation regarding Japanese flights is “very complex,” but that the decision to hub via Seoul to southern Japanese cities is in line with emerging demand patterns.

“Those are the cities where most of the foreign companies and also embassies have relocated in the current process,” he said. “So far we are in perfect alignment with the German foreign ministry. This morning we got explicit confirmation that they really praise and applaud us for our decision.”

Lufthansa’s planned alliance with All Nippon, which would seek to boost market share by coordinating sales strategies and capacity, may fall victim to the disruption, CEO Franz said.

“Preparations were going according to plan and approval of the competition authorities in Japan was expected around mid- year,” he said. “This might change due to current developments.”

Finnair Oyj (FIA1S), the European carrier most exposed to the Japanese market, according to analysts at Citigroup Inc., said flights are “quite full” in both directions, with Tokyo operating via Nagoya to incorporate a staff changeover.

‘Traveling Home’

“We have a lot of Japanese customers traveling home from Europe, and from Japan we have both passengers from Europe and Japanese passengers as it’s their holiday season there,” said Maria Mroue, a spokeswoman for Finland’s largest airline.

Stockholm-based SAS Group, the Nordic region’s biggest carrier, is also carrying many returning Japanese on trips routed via Beijing, spokeswoman Elisabeth Manzi said by phone.

“To Scandinavia from Japan we’ve had quite full flights with just some seats left,” she said.

Services operated by AMR Corp. (AMR)’s American Airlines are also “pretty much full in both directions,” International Vice President Kurt Stache said in an interview in Helsinki.

“As long as there’s demand we will continue to fly, as long as it’s a safe environment to fly into,” he said.

To contact the reporters on this story: Cornelius Rahn in Frankfurt at crahn2@bloomberg.net; Steven Rothwell in London at srothwell@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net

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