The total capacity or the number of seats available from this month to December will shrink 5.2 per cent, 46.3 million seats fewer than a year ago.

Britain-based OAG, which tracks flight bookings and trends, said in its most recent forecast that Asia especially is not looking good with capacity set to fall by a higher-than-global average of 6.5 per cent and flights by 7.1 per cent.

Chief operating officer Steve Casley said 'airlines are extremely vulnerable and quick to react to economic downturns and subsequent shifts in market demand'.

Some expect that reduced capacity will drive fares up, even as the financial crisis wipes out the weak carriers.

Mr Stephen Durrand, a managing director at Amadeus, a technology and distributions solutions provider, foresees the rise of so-called 'super' airlines over the next five years.

'We are seeing survival of the fittest. The big are going to become bigger. The small will be forced to merge to achieve an economy of scale,' said Mr Durrand.

'Super airlines will use their muscle to negotiate better rates, and we will see reduced capacity and higher fares.'

Airfares have held steady, although ad-hoc promotions and discounted seats are more common now as airlines struggle to fill planes on poor-performing routes and during lull periods, agencies and travel management companies said.

With jet fuel prices falling from a high of over US$180 (S$266) in July to below US$100 now, some carriers, including Singapore Airlines and British Airways, have also made recent cuts in their fuel surcharges.

Ms Alicia Seah, senior vice-president for marketing and public relations at CTC Holidays, said it was too early to assess the real impact of the financial crisis on air travel.

But she expects that consumers will be savvy about travel spending and options, as they have been the last few months when oil prices were climbing and inflation was at record highs.

'People are travelling less often and opting for cheaper destinations within the region, like Bintan and Batam in Indonesia, to stretch their dollar,' she said.

The company plans to offer customers urban getaways to places like Sentosa and D'Kranji Farm Resort.

Mr Haydn Long, spokesman for Flight Centre, one of Australia's leading travel agents, expects the business to grow by about 4 per cent this year compared with about 7 or 8 per cent previously.

Corporate travellers are feeling the pinch too. Mr Berthold Trenkel, Asia Pacific president of travel management company Carlson Wagonlit Travel (CWT), said the biggest change in activity level was in Hong Kong, 'which generally has a stronger exposure to the financial sector than Singapore', and in the Indian market 'which is more volatile and also has a stronger exposure to the US'.

Hong Kong's international airport recorded a sharp drop in passenger volume last month, registering a 4.7 per cent fall from September last year to 3.6 million people, data released yesterday showed.

Some continued trends in consumer behaviour include companies 'looking for ways to travel 'smarter', for example, extending the number of flying hours required to fly business class or even moving to an economy class-only policy'.

'Other examples include combining meetings, sending fewer people on the same trip.'

But travel will continue, stressed Ms Irene See, American Express vice-president and general manager for global business travel in the region.

While economic stresses have placed pressure on the bottom line, 'business travel remains an essential component of effectively managing and growing a business', she said.

In the end, how the industry fares will depend on how prolonged the crisis is, experts said. The director-general of the European Regions Airline Association (ERA), Mr Mike Ambrose, said recently that the climate for airlines is 'far more significant, far more far-reaching' than after the Sept 11, 2001 terrorist attacks.

'At 9/11, there was a terrorist attack that created a loss of confidence in safety. This is far more pernicious - it is a loss of confidence in investment,' said Mr Ambrose. 'There are a major set of problems that go way outside aviation and take longer to resolve.'

He expects the number of airline bankruptcies to double from more than 30 so far this year to at least 70 by year-end.

The International Air Transport Association (Iata), which had forecast before the financial crisis erupted that airlines would lose a collective US$5.2 billion this year and US$4.1 billion next year, will do an update in December.

karam@sph.com.sg

Additional reporting by Roger Maynard in Australia