A report by the Centre for Asia Pacific Aviation (CAPA) said conditions in an industry already distressed by the September 11 2001 terrorist attacks in the United States had deteriorated because of recent events.

"Recent service cutbacks are already more severe than occurred in the 1991 Gulf War on the back of what already is a distressed industry," the report said.

"There is little indication of short-term improvement.

"In some cases, the cutbacks embrace route rationalisations that were already in the pipeline, as airlines responded to a new world situation. This further exaggerates what is clearly now developing into a near-worst case scenario for the airline industry."

The report said some North American and European carriers had passed the "point of no return".

"As it becomes apparent that the Iraq war is unlikely to end soon, many airlines were moving to a second phase of risk management."

The CAPA said demand had fallen by as much as 25 percent in some markets. Airlines the world over had recently announced cuts of up to 20 percent to scheduled routes.

Fuel prices were muted "for the time being" but a surge, which is increasingly likely if the war is protracted, would add further pain.

It said European airlines were being moderately effected by the war, cutting schedules by between six and 10 percent.

But North American carriers were badly affected, with capacity reductions of around 10 percent or more across the board to be implemented from early April.

The CAPA said traffic within Asia had been relatively lightly affected by the Iraq conflict, but the outbreak of severe acute respiratory syndrome posed a real threat to traveller confidence in specific markets.

Australian flag carrier Qantas is among a string of regional airlines hit by the virus, announcing last Friday that it would not meet this year's profit targets as passengers delay bookings.

The virus has killed at least 59 people, including 34 from China, and infected more than 1,600 others in 15 countries worldwide.

WAR.WIRE