Crisis in aviation industry: Traffic results for January show a deepening y/y demand slump

The 5.6% drop in passenger demand outpaced capacity cuts of 2.0% driving the load factor to 72.8% - 2.8% below what was recorded for January 2008.

The decline in cargo markets in December (-22.6%) worsened in January 2009 with a 23.2% year-on-year demand drop. This is the eighth consecutive month of contraction for freight traffic.

“Alarm bells are ringing everywhere. Every region’s carriers are reporting big drops in cargo. And, aside from the Middle East carriers, passenger demand is falling in all regions. The industry is in a global crisis and we have not yet seen the bottom,” said Giovanni Bisignani, IATA’s Director General and CEO.

European carriers offset a 5.7% decline in demand with a 3.6% decrease in capacity. Demand decreased sharply from the 2.7% fall in December as European economies move into deep recession. The carriers led the cargo decline with a 23% y/y drop.

“The only good news is that fuel prices remain well below last year’s level. But the drop in demand is much more harmful. The revenues are expected to fall by 35 billion US dollars to 500 billion US dollars, delivering a loss of US$2.5 billion this year

While others ask for government bailouts, he commented, aviation industry’s demands on Governments are much more modest. “First, don’t tax us to death in order to pay for investments in the banking industry. This includes the UK government’s plans to increase its multi-billion pound Air Passenger Duty and the Dutch Government’s misguided departure tax,” said Bisignani.

Last year, the total losses marked by aviation industry deepened to 5 bln US dollars. The biggest losses were driven by the freight traffic that dropped 4% in 2008 (by 22.6% in December), while the passenger traffic increased by narrow margin, by merely 1.6% from 7.4% in 2007.

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