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EgyptAir crash highlights how terror fears are shifting tourism

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The crash of an EgyptAir flight from Cairo to Paris overnight Thursday is the latest example of the shocks reshaping tourism flows in Europe, as a spate of deadly terrorist attacks cause travelers to flock to safer shores in Spain, Greece and Portugal.

[FRANKFURT] The crash of an EgyptAir flight from Cairo to Paris overnight Thursday is the latest example of the shocks reshaping tourism flows in Europe, as a spate of deadly terrorist attacks cause travelers to flock to safer shores in Spain, Greece and Portugal.

Tour companies and airlines are scrambling to shift resources as European vacationers shun Egypt, Turkey and Tunisia after attacks there. While it's so far unclear what happened to the EgyptAir flight, the specter of terrorism surrounds any such incidents and reawakens security concerns among already jittery travelers.

"Geopolitical events have become an ever more important factor for tourism," said Steffen Wagner, head of transport and leisure at accounting and consulting company KPMG.

"Turkey has already been hit hard this year. For Egypt, the plane crash will mean another dip in demand, depending on the outcome of the investigation."

Terror fears have led to an unprecedented shift in travel capacity, with airline seats to Portugal this summer surging 17 per cent and Spain, Europe's biggest tourism market, jumping 13 per cent, according to flight-scheduling company OAG.

Egypt and Tunisia are the biggest losers in per centage terms, while seats to Turkey, excluding Turkish Airlines, which transits many of its international passengers through its Istanbul hub, are down 3.9 per cent.

Turkey, where sun-seekers typically flock to the beaches on its south coast, was hit after 11 German tourists were killed there in mid-January. Leisure carrier SunExpress has shifted aircraft out of the country as foreign arrivals dropped for eight straight months, the longest declining streak since at least 2006. EasyJet Plc, Thomas Cook Plc's Condor arm and TUI AG's Thomson Airways also pared exposure. IAG SA's Iberia scrapped flights to Istanbul, while Delta Air Lines Inc abandoned plans to serve the city from New York. Some cruise ships also stopped calling in Istanbul.

The average occupancy rate in Turkish hotels has fallen below 50 per cent, and rates are tumbling so that a two-week holiday for a family of four in the Antalya region now costs less than half the price of an equivalent break on the Spanish island of Majorca, according to strategy consultant Simon-Kucher & Partners.

The shaky travel market caused the shares in tour operator Thomas Cook Thursday to tumble19 per cent, its biggest drop in four years. Amid the backdrop of the EgyptAir crash, the company revealed that its summer bookings fell 5 per cent due to weak demand for Turkey, and its Belgian business suffered after the March 22 attack at Brussels Zaventem airport sapped demand.

Aside from security concerns over hot spots in the eastern Mediterranean, overseas visitors are also shying away from Europe after Paris and Brussels were hit by deadly assaults, with more than 180 people killed and some 700 injured in bombings and shootings. That's hitting the lucrative long-haul routes of Deutsche Lufthansa AG and other airlines, as group bookings from China, Japan and North America suffer. Germany carrier Lufthansa reined in expansion plans earlier this month as a glut of plane seats depresses ticket prices and travelers delay bookings amid fears of terror attacks.

After an attack, "demand just falls off and it happens to all airlines, so you end up having to stimulate it," EasyJet Chief Executive Officer Carolyn McCall said to Bloomberg TV on May 10. "We've not gone through summer yet, so we don't know whether the late bookings are going to come in."

The attacks are also deterring Middle East travelers from going to Europe amid concerns about security as well as anti- Arab sentiment, said Mark Martin, head of aviation consultancy Martin Consulting in Dubai.

"Western Europe has always been the first port of call for Mideast travelers, but this may slow down because they perceive it as unsafe and who wants to deal with something unpleasant on a holiday," Mr Martin said. Still, "we won't see tourism cease. Life goes on."

Meanwhile, the beaches of the Portugal, Greece and the Canary Islands, which are seen as safer, will be swarming with visitors this summer, and capacity to Spain is up by more than 10 million plane seats to over 90 million.

"Airlines and tour operators are de-risking, and so are customers," said John Grant, senior analyst at OAG. "Attacks in the past seemed like one-off events; now there are so many it appears constant."

BLOOMBERG