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Airline Problems Mount As Demand Slows

August 4, 2008 By: George Dooley

The International Air Transport Association (IATA) released international traffic data for June that showed a continued slowing of demand growth for air transport. Passenger demand growth fell to 3.8 percent, the lowest level since 2003. Passenger load factors dropped to 77.6 percent, 1.2 percentage points below the 78.8 percent recorded for June 2007.

“The global economic turbulence clearly shows in the 0.8 percent drop in freight volumes compared to last year. Although the passenger demand grew by 3.8 percent, this is the slowest growth that we have seen since the industry was hit by the SARS crisis in 2003. With consumer and business confidence falling and sky-high oil prices, the situation will get a lot worse,” said Giovanni Bisignani, Director General and CEO of IATA.

“The airline sector is in trouble. Losses this year could reach US$6.1 billion, more than wiping out the US$5.6 billion that airlines made in 2007. Falling demand and rising costs are reshaping the industry,” said Bisignani.

“To survive the crisis, urgent action is needed. Airports and air navigation service providers must come to the table with efficiencies that deliver cost savings. Labor must understand that efficiency is the only path to job security. And governments must stop crazy taxation and give airlines the freedom to merge and consolidate where it makes business sense.”

Global passenger traffic growth of 3.8 percent is well below the 5.4 percent recorded year-to-date, IATA said. Capacity growth of 5.5 percent outstripped demand, pushing the passenger load factor down to 77.6 percent. North American airlines saw demand growth drop to 4.4 percent in June (sharply down from the 8.2 percent growth recorded in May). Domestic traffic in the U.S. contracted by almost 4 percent, while European airlines saw demand drop to 2.1 percent (compared to 4.1 percent in May).


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