Airlines set to suffer steep decline in May
By Kevin Done
Published: May 27 2009 17:53 | Last updated: May 27 2009 18:49
The rate of decline in demand for air travel slowed in April, but preliminary data for European airlines suggests a renewed steep fall during May.
Giovanni Bisignani, director general of Iata, the international airline trade association, said on Wednesday “the worst may be over. However, we have not seen any signs that recovery is imminent.”
Air cargo shipments remained “at a shockingly low level,” said Mr Bisignani following a drop year-on-year of 21.7 per cent in April, the fifth successive month in which air freight has been more than 20 per cent below previous year levels.
All three leading European airlines, Air France-KLM, Lufthansa and British Airways have reported operating losses for the first three months of 2009 and both Air France-KLM and BA have indicated they are expecting to make a second successive year of losses in their current financial years to the end of March 2010.
Long-haul airlines in particular have been hit hard by the steep decline in premium travel volumes, where they have traditionally generated the bulk of their profits, as well as by the precipitious drop in air freight.
According to Iata the number of passengers globally travelling on premium tickets fell by 19.2 per cent in March following a drop of 21.1 per cent in February. It said premium fares were falling significantly due to the rapid rise in the number of unfilled seats. It estimated that revenues from premium travel were down by 35-40 per cent in March and in the first quarter.
Globally Asia-Pacific markets and long-haul markets connected to the region were the weakest and saw faster declines for premium travel in March.
Iata said on Wednesday that while April’s 3.1 per cent drop in passenger demand was a clear improvement compared to the fall of 11.1 per cent year-on-year in March, the April data had been favourably affected by the timing of the Easter holidays. There had been an underlying fall of more than five per cent.
The slower rate of decline last month had also come at the expense of revenues, as airlines discounted fares heavily in order to fill seats and generate cash.
“We are not out of the woods yet,” said Mr Bisignani. “The demand improvements that we saw in April are welcome. But the 3.1 per cent decline in passenger demand still outstripped the 2.5 per cent cut in capacity. There is no improvement in revenues as yields continue to fall.”
Iata said Asia Pacific carriers had continued to see the most significant deterioration in demand with a drop in passenger volumes of 8.6 per cent year-on-year, which again outstripped the 7.4 per cent cut in capacity.
Only carriers in the Middle East and Latin America recorded increases in both demand and capacity in April.
Iata is currently forecasting net losses of $4.7bn this year for the airline industry up from the $2.5bn forecast made in December reflecting the rapid deterioration in global economic
conditions.
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