Airlines climbing out of recession: IATA

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Airlines, including those in Africa, are climbing out of recession with further strong increases for passenger travel and freight in February, industry association IATA says. One sign of the global recovery was record capacity usage for passenger travel in February, traditionally the weakest month for air travel, the International Air Transport Association says in its latest analysis of global and regional demand for air traffic.

“We are moving in the right direction. In two to three months, the industry should be back to pre-recession traffic levels,” IATA director-general Giovanni Bisignani said in a statement to publish the findings. “The task ahead is to adjust to two years of lost growth.” Passenger demand in February was 9.5% higher than a year earlier, but supply increased by only 1.9%. The result was a global passenger load factor – a measure of how full planes fly – of 75.5%, or a February record in seasonally adjusted terms of 79.3%, IATA said.

Airlines are maintaining normal aircraft utilisation on short-haul fleets but long-haul utilisation is down over 8% compared to 2008 levels. The resulting increase in unit costs for long-haul operations may delay the positive impact of stronger demand to the bottom line.

Cargo demand grew 26.5%, said IATA, which estimates that 30% of world trade by value is moved by air freight, making its data an important indicator of global commerce flows and overall economic activity. IATA said February 2009 had marked the bottom of the cycle for passenger traffic during the recession, and passenger demand would need to recover by a further 1.4% to return to pre-crisis levels. Cargo traffic, which plunged much further than passenger business, as demand for goods plummeted in the crisis, must rise a further 3% to regain pre-crisis levels after hitting a low in December 2008, the IATA report added.
“This is still not a full recovery. The task ahead is to adjust to two years of lost growth,” Bisignani said in a statement. IATA, which groups about 230 airlines, including Air China, Lufthansa, British Airways, Singapore Airlines and Skywest, forecast earlier this month that airlines would lose $2.8-billion – down from about $5.6 billion predicted in December – this year after losing $9.4-billion in 2009.

As usual, regional demand patterns varied, with European and North American carriers showing the weakest growth in February, while Asia-Pacific carriers saw strong increases. Middle East airlines recorded passenger demand growth of 25.8%, the strongest of any region as travel markets develop in the area and local carriers compete on long-haul connections to Asia via Middle Eastern hubs, it said. Latin American carriers saw a 41,9% increase in cargo demand.

Regional demand patterns continue to reflect the asymmetrical nature of the economic rebound.

European carriers posted the weakest growth at 4.3%.  This is the result of sluggish home economies, rising unemployment and labour strikes. This region saw a capacity reduction in February (-0.5%).

North American airlines posted weak growth of 4.4%. Having cut capacity deeply during the recession (February 2010 capacity was 3.0% below 2009 levels), this is to be expected. Consumers continue to pay down debt rather than increase spending, keeping demand for air travel comparatively weak.

In contrast to Europe and North America, Asia-Pacific carriers posted strong traffic growth of 13.5%, which was partly boosted by the timing of the Chinese New Year. Compared with the mid-2009 low there has been a 19% rebound.

Middle Eastern airlines recorded traffic growth of 25.8% – the strongest of any region. Travel markets continue to develop within the region creating new demand. Successful competition on long-haul connections to Asia over Middle Eastern hubs has improved market share for the region’s carriers.

Latin American carriers posted growth of 8.5% on the strength of the performance of the region’s economies.

African airlines have also benefited from strong local economies with a 9.8% growth. However, capacity is also coming back fast (+9.2%) so airlines in this region continue to see the weakest load factors.
“While the numbers are improving, the year has started with two disappointments,” said Bisignani. “The first is in Europe. We anticipate Europe to post US$2.2 billion in losses this year—the highest among the regions. Weak European passenger and freight demand is in line with our forecast. It is disappointing to see labour at European airlines engaging in strikes when the fragile industry needs to focus on improving efficiency and reducing costs.”
“The second is the failure to address ownership issues in second stage talks on open skies between the EU and the US. Last week’s agreement was not a step backwards. The gains from the stage one talks have not been lost. But the two sides missed an opportunity at this critical time to give airlines the much needed normal commercial freedom to access global capital markets without the limitations of outdated foreign ownership restrictions embedded in the current bilateral system,” said Bisignani.



IATA’s Agenda for Freedom continued to gain support with Kuwait, Bahrain and Lebanon endorsing its multilateral Statement of Policy Principles on liberalisation in the last month. Chile, Malaysia, Panama, Singapore, Switzerland, the US, the United Arab Emirates and the European Commission were the original signatories in November 2009.
“Liberalisation must not fall off the agenda as economies improve. To move forward, labour and politicians must come on board by understanding a fundamental reality. Restrictions on ownership do not protect jobs. On the contrary they put jobs at risk. As we are seeing with the two-speed recovery, ownership restrictions limit growth by preventing airlines from growing into efficient global businesses that can take advantage of global opportunities,” said Bisignani.