IATA calls for airline reform as financial crisis bites

The International Air Transport Association says the growth in passenger and airfreight traffic, robust at the beginning of 2008, has dropped dramatically in recent months and now pose a threat to airlines as much as soaring fuel prices earlier this year.
IATA, which represents some 230 airlines comprising 93% of scheduled international air traffic, blamed the fall-off on the global financial crisis and consequent change in economic climate.
The global airline body in a press release issued from Hanoi in Vietnam, says international passenger demand growth slowed to 1.3%, “following disappointing growth of 1.9% in July.”
IATA added that passenger load factors fell to 79.2% “a sharp drop-off from the 81% recorded during the same period last year as capacity growth outpaced demand.”

International freight traffic saw its third consecutive month of contraction with a 2.7% decline following drops of 1.9% in July and 0.8% in June.

IATA Director General and CEO Giovanni Bisignani says passenger traffic grew by 5.4% in the first half of the year. “That slowed to 1.9% in July and 1.3% in August. The contrast between the first half of the year and the last two months is stark,” he says.
“The slowdown has been so sudden that airlines can`t adjust capacity quickly enough. While the drop in the oil price is welcome relief on the cost side, fuel remains 30% higher than a year ago. And with traffic growth continuing to decline, the industry is still heading for a US$5.2 billion loss this year.”

Air freight has also declined over for the past three months, Bisignani says, led by Asia Pacific carriers that posted a 6.5% decline in July and a 6.8% decline in August.

“Airlines carry 35% by value of the goods traded internationally. The three-month decline—led by weakness in Asia-Pacific markets—is a clear indication that global trade is slowing down. This shows that the impact of the financial crisis is broad geographically and will worsen before it gets better,” warns Bisignani.
IATA notes a sharp fall in traffic for Africa (-5%) as well for the second month running, “which is in contrast with the relatively robust travel markets within the continent and to some major markets.  
“Within Africa travel was expanding by 9.8% in July and in double figures to the Middle East, although markets to Europe and the Far East were falling.  African airlines appear to be continuing to lose overall market share,” the airline body warns.
Bisignani, who has been warning for most of the last year that the airline industry faces an existential emergency, says that crisis is now “deepening and no region is immune”.
He cautions that urgent measures are needed to keep airlines flying – “from taxation to charges and operational efficiencies, all areas impacting the business must be examined for ways to reduce costs and drive efficiencies. It`s a matter of survival.”

Bisignani is urging countries to follow Brazil`s example, where President Luis Lula da Silva has approved the removal of a fuel tax on international flights. “After a two-year campaign, this is great news and the US$411 million savings over the next four years could not be better timed,” Bisignani says.

“The challenge is for other governments to follow Brazil`s example, conform with global standards and free the industry of crazy taxation.”
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