But International Association Sees Encouraging Year-End Improvements

The International Air Transport Association (IATA) reported December and full-year 2009 demand statistics for international scheduled air traffic that showed the industry ending 2009 with the largest ever post-war decline. Passenger demand for the full year was down 3.5% with an average load factor of 75.6%. Freight showed a full-year decline of 10.1% with an average load factor of 49.1%.

“In terms of demand, 2009 goes into the history books as the worst year the industry has ever seen. We have permanently lost 2.5 years of growth in passenger markets and 3.5 years of growth in the freight business,” said Giovanni Bisignani, IATA’s Director General and CEO.

International passenger capacity fell 0.7% in December 2009 while freight capacity grew 0.6% above December 2008 levels. Yields have started to improve with tighter supply-demand conditions in recent months, but they remained 5-10% down on 2008 levels. “Revenue improvements will be at a much slower pace than the demand growth that we are starting to see. Profitability will be even slower to recover and airlines will lose an expected US$5.6 billion in 2010,” said Bisignani.

Seasonally adjusted demand figures for December compared to November 2009 indicate a 1.6% rise in passenger traffic while freight remained basically flat with a 0.2% decline.

One of the bright spot was that December 2009 passenger demand recorded a 4.5% improvement compared to December 2008, with a load factor of 77.6%. While this is an 8.4% demand improvement from the February 2009 low point, it is still 3.4% below the early 2008 peak.

• Carriers in Asia-Pacific, Europe and North America recorded year-on-year declines in passenger demand of 5.6%, 5.0% and 5.6% respectively in 2009. Asia-Pacific carriers stand out as benefitting most from the year-end upturn with an 8.0% year-on-year improvement in December. This reflects their 35% contribution to the year-end rise boosted by the significant economic upturn in the region. By contrast, European carriers saw a 1.2% decline and North American carriers declined by 0.4%. While both North American and European carriers saw demand improvements in the first half of the year, the second half was basically flat.
• Middle Eastern carriers generated the fastest growth in passenger traffic at the end of the year with a 19.1% increase in December (and 11.2% growth for the entire year). These gains result from Middle Eastern carriers taking a larger share of long-haul connecting traffic over their hubs.
• Latin American carriers recorded 7.1% growth in December. Full-year traffic growth was constrained to 0.3% due to the impact of Influenza A(H1N1) fears during the second and third quarters.
• Africa’s carriers experienced a sharp decline of 6.8% in 2009 primarily on an exceptionally weak first half. Their year ended with December demand at 3.1% above previous year levels.

December 2009 freight demand showed a 24.4% improvement on December 2008 with a load factor of 54.1%. This improvement is exaggerated by the exceptionally weak performance in December 2008 which was the low point on the cycle. Freight demand is still 9% lower than the peak in early 2008. Optimism is returning to the industry as purchasing managers survey indicators reached a 44-month high in December pointing towards increased freight volumes in the coming months.

• Asia-Pacific carriers accounted for over 60% of the increase in international air freight markets over the past 12 months—outperforming their 45% market share. Despite this improvement, Asia-Pacific carriers’ freight volumes remain 8% below peak levels.
• European carriers remain 20% below 2008 peak levels reflecting the glacial pace of economic recovery in Europe compared to Asia-Pacific.
• Middle East carriers and Latin American carriers are smaller market participants, but ended the year better than peak levels by 7% and 21% respectively.

“The industry starts 2010 with some enormous challenges. The worst is behind us, but it is not time to celebrate. Adjusting to 2.5-3.5 years of lost growth means that airlines face another Spartan year focused on matching capacity carefully to demand and controlling costs,” said Bisignani.

“We also face a renewed challenge on security as a result of the events of 25 December 2009. The approach of the Obama administration is encouraging with Department of Homeland Security Secretary Janet Napolitano visiting IATA’s offices in Geneva to engage industry to find solutions. We agreed that governments and industry must cooperate and we are preparing for a meeting in the coming weeks to follow-up on our recommendations which focused on finding more efficient ways to implement intelligence-driven and risk-based security measures,” said Bisignani.

“Governments and industry are aligned in the priority that we place on security. But the cost of security is also an issue. Globally, airlines spend US$5.9 billion a year on what are essentially measures concerned with national security. This is the responsibility of governments, and they should be picking up the bill,” said Bisignani.

FMI: www.iata.org