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IATA: Airline Industry To Remain In The Red For 2010

However, January Demand Shows Further Improvement

The International Air Transport Association (IATA) released data Tuesday showing that January 2010 demand statistics for international scheduled air traffic that showed continuing improvement. Compared to the previous year, January passenger demand was up 6.4%. Against this improving demand, a 1.2% increase in passenger capacity in January pushed load factors to 75.9% (up from the 72.2% recorded for January 2009). 

International cargo demand showed a 28.3% improvement with only a 3.7% increase in capacity. This pushed the cargo load factor to 49.6% which is a step-change from the 40.1% recorded in January 2009.

The large increases in year-on-year comparisons reflect a steady improvement from the precipitous fall in demand that characterized the early part of 2009 rather than a dramatic improvement in January. Compared to December 2009, and adjusting for seasonal variations, passenger demand grew by 0.5% while air freight volumes increased by 3.0%.

“Airlines have lost 2-3 years of growth. Demand is moving in the right direction. The 3.0% increase in freight volumes from December to January is particularly encouraging. We can start to see the future with some cautious optimism, but better volumes do not necessarily mean better profits. Passenger yields are still 15% below peak. And we expect 2010 losses to be US$5.6 billion,” said Giovanni Bisignani, IATA’s Director General and CEO.

There are large geographical differences in the improvements. The strongest upturns have been seen in markets where economic recovery from the recession has been strongest—Asia, Latin America and the Middle East.

Compared to the low point in the cycle (February 2009) international passenger traffic is up 8.6%. The market has not yet recovered from the losses of 2008 and early 2009. Demand must improve by a further 2% to return to the peak levels of early 2008.

Asia Pacific carriers experienced a 6.5% increase in demand compared to the previous year. Of the improvement in demand seen since the early 2009 low point, 31% has been realized by carriers in the region which is leading the global economic recovery. Carriers in North America and Europe saw demand increase by 2.1% and 3.1% respectively. Although both regions have gained 6% from the early 2009 lows, they remain 4-6% below the early 2008 peak levels. This reflects the jobless recovery from the recession in which consumers are focused on paying down debt. In other regions, Middle Eastern carriers grew throughout the recession, and growth accelerated to 23.6% in January. Latin American carriers saw demand increase by 11% in January on the back of a strong regional economy, and African carriers recorded a 6.3% improvement in January, assisted by robust regional economic activity.

Compared to the low point in the cycle (December 2008-January 2009), international freight traffic has regained about 28%. This is still 3-4% below the early 2008 peak level.

The sharp improvement in air freight, which accelerated to 3.0% in January compared to December, is being driven by businesses re-stocking depleted inventories. This part of the inventory cycle will not last much longer. Durable air freight growth will require consumers to start buying again and businesses to return to making investments. While these improvements are beginning to be seen in Asia, Europe and North America lag behind.

With an 11.6% improvement in January compared to the previous year, carriers in Europe stand out for their sluggish demand recovery. Freight volumes are only 7% above the December 2008 low and 15% below the cycle peak. "We are starting to see some encouraging signs in demand, albeit with large differences among the regions. Unfortunately the constraints of the archaic bilateral system limit airlines from being able to respond as normal businesses to market opportunities. We cannot behave like normal businesses. Political borders limit opportunities for consolidation. And we still require governments to negotiate open markets” said Bisignani.

Under the auspices of IATA’s Agenda for Freedom initiative, in November 2009, seven governments (Chile, Malaysia, Panama, Singapore, Switzerland, the United  Arab Emirates, and the United States) and the European Commissions signed a multilateral statement of policy principles focused on liberalization of the air transport industry. Premised on maintaining a level playing field, the policy principles support liberalization of ownership, market access and pricing. Its latest impact can be seen in the recent signing of an open skies bilateral agreement between Panama and Colombia.

“With each open skies bilateral, we take a step in the right direction. Recovering from the years of lost growth as a result of this crisis is a long and hard journey. Governments should not make it any more difficult by maintaining policies that restrict airlines ability to do business,” said Bisignani.

FMi: www.iata.org

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