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IATA: Two Years of Lost Airline Growth - Slow Improvement Trend

November 30, 2009 By: George Dooley

The International Air Transport Association (IATA) reported international scheduled traffic results for October 2009 that show improving conditions with passenger demand up 0.5 percent compared to October 2008. Load factors for passenger and cargo continue at pre-recession levels of 78 percent and 54.1 percent respectively. 

"The improvement that started since passenger traffic hit bottom in March is similar to the pace of growth in 2006 and 2007," IATA warned. "Without an exaggerated rebound from pent-up demand, there will be no rapid catch-up to the growth trend established in the 2005 to early-2008 period."

"The crisis has cost the industry two years of growth. Adjusting costs and capacity to meet that reality will be challenging," said Giovanni Bisignani, IATA’s director general and CEO. 

The improvement in load factors to pre-recession levels is largely the result of careful capacity management, IATA said. Compared to October 2008, overall passenger capacity on offer was down 3.3 percent. Stripping out seasonal fluctuations, passenger capacity has been essentially flat throughout 2009. Responding to the precipitous fall in cargo demand, October cargo capacity was 7.4 percent below the previous year’s levels.

Yields remain under severe pressure. Although there has been a modest rise in air fares since mid-year, it remains around 20 percent less expensive to fly in real terms today than it was a year ago.  North American carriers saw significant growth in international traffic through the middle of 2009. Very significant capacity cuts across both the Atlantic and Pacific have reduced traffic carried in October to -2.6 percent below 2008 levels.

"This recession is re-emphasizing a structural weakness in the industry. The inability to merge across political borders has created a hyper-fragmented industry. The industry is financially sick, and the medicine of cross-border consolidation is off limits due to an archaic regulatory structure. Market forces should guide our commercial operations. Instead the bilateral system, established in the 1940’s, puts governments in control of which markets can be served and limits access to global capital with ownership restrictions. No other industry faces such regulatory manacles," said Bisignani.


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