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IATA Shocked By 25-30 Percent June Revenue Drop

July 30, 2009 By: George Dooley

Passenger demand declined 7.2 percent in June, the International Air Transport Association (IATA) reports, compared to the same month in 2008 while freight demand was down 16.5 percent. International passenger load factors stood at 75.3 percent, down from 77.6 percent recorded in June 2008.

“Airlines are seeing international revenue falls of up to 30 percent at the start of the busy June-August period when airlines traditionally make their money. The outlook remains bleak,” Giovanni Bisignani, IATA’s director general and CEO said.

The 7.2 percent drop in international passenger demand was a slight improvement on the 9.3 percent fall in May. The capacity adjustment of -4.3 percent did not keep pace with the fall in demand leaving average fares and yields under significant pressure. As a result, June revenue on international markets fell by a shocking 25-30 percent.

“International passenger demand remains very weak,” said Bisignani. “While it appears that there is stabilization in some markets, this comes at a steep price. Capacity cuts have not kept pace with demand falls. Even with lower fares, the load factor remains 2.3 percent below last year’s levels.

North American airlines reported a relative improvement in June, with demand falling 6.7 percent in June (compared to the 10.9 percent fall in May). The smaller decrease is likely due to discounting. Load factors of 82.6 percent were the highest of any region, but revenue from international markets was down about 29 percent in June, the same as the previous month.

“These are extremely challenging times for airlines. There are no signs of an early economic recovery," said Bisignani. "Other external risks are potentially great, including rising oil prices and the impact of Influenza A(H1N1) on demand. Cash flow is threatened by weak demand, exaggerated by fare discounting. And, after years of cost reduction, the scope for further cuts is limited. Flexibility is critical in finding new sources of capital and new markets. This crisis highlights the need for governments to replace outdated restrictions on ownership and market access with modern commercial freedoms. Quick action is needed.”


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