The International Air Transport Association (IATA) released its March data for scheduled international traffic, reporting that passenger demand fell to 11.1 percent below March 2008 levels. Airlines cut international passenger capacity by 4.4 percent resulting in an average load factor of 72.1 percent. This is 5.4 percentage points below the average load factor recorded in March 2008, IATA said. IATA also said that it was too early to access the impact of the swine flu outbreak on air travel.
“The global economic crisis continues to reduce demand for international air travel,” said Giovanni Bisignani, IATA’s director general and CEO. IATA estimates that international revenues in March will be impacted with a decline of up to 20 percent.
“Airlines cannot adjust capacity to match demand. Load factors have dipped sharply from last year. All of this is hitting revenues hard,” said Bisignani. “The only glimmer of hope is that cargo demand has stabilized this month although at the shockingly low level of -21.4 percent.”
North American carriers saw a decline in international passenger demand of 13.4 percent, IATA reports, as travel was further discouraged by U.S. unemployment reaching 8.5 percent in March and consumer confidence remaining weak.
Rising concerns over swine flu could have a significant impact on traffic. “Safety, as always, is our number one priority. IATA is working in close cooperation with the World Health Organization to ensure an efficient response of the air transport industry to the challenges that swine influenza will present,” said Bisignani. “It is still too early to judge what the impact of swine flu will have on the bottom line. But it is sure that anything that shakes the confidence of passengers has a negative impact on the business. And the timing could not be worse given all of the other economic problems airlines are facing.”
Aside from swine flu, Bisignani noted that airlines face many challenges. “Like the rest of the economy, recovery in the air transport sector rests on a rise in consumer confidence and consumer spending," he said. "Shedding debt will be a major headwind. US households, for example, are leveraged at 130 percent of annual income. Even bringing this down by 5 percent erases US$500 billion in consumer spending. The challenge for governments is to turn stimulus funds into spending that fuels trade.”
Noting the deteriorating financial situation of many airlines, Bisignani urged governments to move forward with liberalization - particularly of the archaic ownership restrictions that prevent cross-border access to capital and consolidation. “Air transport is an economic catalyst and can play an important role in driving recovery, but only if we are financially sound," said Bisignani. "Access to global capital and the freedom to consolidate would go a long way to shoring up this industry - without government bailouts. Unfortunately, instead of using airlines to drive growth, many governments see us as a cash cow."