The number of people flying business and first class around the world fell sharply in March, depressing fares and hitting airlines’ revenues, an industry body said, but the sharp slump in air freight may have steadied.
There was a 19% drop in premium air travel in March, against an 8% fall in cheaper seats.
That led the International Air Transport Association (IATA) to say "We have not reached a floor to the fall in air travel" as it noted total air travel was down.
"Passenger demand fell to 11.1% below March 2008 levels. Airlines cut international passenger capacity by 4.4% resulting in an average load factor of 72.1%.
"This is 5.4 percentage points below the average load factor recorded in March 2008. Freight demand was relatively stable at -21.4% compared to March 2008," IATA said last week.
“The global economic crisis continues to reduce demand for international air travel,” according to 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%.
“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 stabilised this month although at the shockingly low level of -21.4%.
"For the fourth consecutive month international cargo demand is hovering in the -21% to – 24% region as a result of the sharp drop in world trade. “It’s not the end of the recession, but we may have found the floor.”
Seeing there was a 23% fall in January, there does seem to be a steadying as the free fall in world trade and just in time exports (for computers and other high end products, as well as foodstuffs) has stabilised, but at very low levels compared with a year ago
Mr Bisignani told Reuters that the market had at least been stabilizing at levels around 20% lower than a year ago.
"It’s not yet enough to say that the situation is picking up because this is also linked with the level of inventories of the manufacturers.
"So we have to wait at least another 3 or 4 months in order to see if we start moving."
In passenger travel the fall has been less nasty (if that’s possible) compared with the sharpness of the fall in air freight volumes.
IATA said "There were some tentative signs of stabilisation in premium markets across the Atlantic and within Europe and premium fares were falling significantly as a result of lower load factors.
"As a result we estimate that revenues from premium travel were down around 35 to 40 per cent in March and the first quarter," the industry body said.
Asia-Pacific and long-haul markets connected to this region experienced the sharpest decline in premium travel.
That’s why Qantas revealed yesterday that it is taking first class travel from at least three routes from now until the end of October.
Qantas shares rose 2 cents yesterday to $1.90.
Qantas also revealed that it will charge extra for seats near exist on medium nd long haul international flights.The import will be up to $110. Sneaky.
"Among the major regions, carriers in Asia Pacific continued to lead the decline with a 14.5% fall in passenger demand, outstripping a 9.3% downward adjustment in capacity. The region is particularly impacted by the fall-off in long-haul travel, which is contracting faster than short-haul," IATA said.
"North American carriers saw a decline in international passenger demand of 13.4% as travel was further discouraged by US unemployment reaching 8.5% in March and consumer confidence remaining weak.
"European carriers saw their international demand fall by 11.6% where confidence has been dented by unemployment in key markets such as Germany and Spain increased to 8.6% and 17.4% respectively," IATA said.
The Middle East was the only region where airlines saw any growth in overall passenger demand in March, while elsewhere around the world passenger demand fell sharply.
"Air cargo demand has moved sideways in the -21% to -24% range since its plunge from -7.9% to -23.2% between October last year and January 2009.
"The severity of air freight slump is at least partly driven by manufacturers seeking to correct large inventory overhangs that emerged in late 2008.
“The stabilisation of the inventory to sales ratio has in turn stabilised air freight demand. Recovery, however, depends on purchasing that can deplete the inventory overhang. Inventory levels remain high and final demand is weak.
"Rising concerns over Swine Influenza could have a significant impact on traffic."
IATA has forecast global carriers are set to lose US$4.7 billion (A$6.1 billion) this year as a result of the global recession that has shrunk passenger and cargo demand, after losses of around US$8.5 billion (A$11 billion) last year.
Late last week British Airways went some way to confirming that forecast with a pre-tax loss of more than 400 million pounds for the March 2009 financial year (more than $A800 million), a big turnaround from 2008’s profit of more than 900 million pounds. It had an operating loss of around 220 million pounds, or just over $A400 million.
IATA’s annual conference starts in Kuala Lumpur the weekend after next. That is likely to see updated forecasts and a lot of soul searchi
