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Airlines In the Red, Despite Demand Improvements

August 27, 2009 By: George Dooley

Passenger demand declined 2.9 percent in July compared to the same month in the previous year while freight demand was down 11.3 percent, the International Air Transport Association (IATA) reported in its analysis of international scheduled traffic. The international passenger load factors stood at 80.3 percent.

“Demand may look better, but the bottom line has not improved," said Giovanni Bisignani, IATA’s Director General and CEO. "We have seen little change to the unprecedented fall in yields and revenues. The months ahead are marked by many uncertainties, including the price of oil. The road to recovery will be both slow and volatile. In the meantime, the industry remains in intensive care.”

The July passenger demand fall of 2.9 percent was a relative improvement over the 7.2 percent drop in June and the 6.8 percent decline recorded over the first seven months of the year, IATA said. July capacity was more in line with reduced demand than in previous months and load factors are similar to those recorded in July 2008. These positive developments, however, have come at the expense of yields which continue to fall sharply, IATA reported.

All regions saw improved demand performance compared to June, but significant differences by region should be noted, IATA said. European and North American carriers saw declines of 3.1 percent and 3.2 percent respectively. Passengers have been trading down to cheaper seats in the face of recession pressures. Airlines have also been leaving less expensive fares open for sale much longer (closer to departure dates) in the face of excess capacity and intensifying competition. The July improvement in travel demand was more the result of deep discounting than stronger incomes or greater economic confidence.

“Airlines need to make their money in the June-August peak travel season. Planes are full. Load factors are high. But revenues are way down. Conserving cash, effectively managing capacity and cutting costs will be the long-term theme for every business in the air transport value chain,” said Bisignani.



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