“Falling demand and rising costs are re-shaping the industry”; IATA warns on slowing growth – 04/08/08

Giovanni Bisignani: “With consumer
and business confidence falling, the situation will get a lot worse”


INTERNATIONAL. The International Air Transport Association (IATA) today revealed figures for June 2008 that show slowing growth in worldwide passenger traffic.

Although IATA said that the industry was in “crisis”, passenger growth (measured in Revenue Passenger Kilometres) was still up +3.8% in the month compared to June 2007. The growth figure was however down on the +5.4% monthly average recorded in the year to date. Passenger load factors dropped to 77.6%, 1.2 percentage points below the 77.8% recorded for June 2007.

IATA Director General and CEO Giovanni Bisignani said: “Although passenger demand grew by +3.8%, this is the slowest growth that we have seen since the industry was hit by the SARS crisis in 2003. With consumer and business confidence falling and sky-high oil prices, the situation will get a lot worse.”

Key figures by region

*North American airlines saw demand growth drop to +4.4% (sharply down from the +8.2% growth recorded in May). Domestic traffic in the US contracted by almost -4%.

*European airlines saw growth of +2.1% (compared to +4.1% in May). Declines in business confidence and industrial production in key European economies may well drive this further down, said IATA.

*Asia Pacific airlines saw their international passenger traffic growth fall to +3.2% in June from +4.5% in May, influenced by weakening long haul destination economies and inflation concerns.

*Middle Eastern carriers saw their traffic growth slow to +9.6% in June from +12.8% in May. This is sharply down from the +18.1% recorded in June 2007.

*Latin American carriers turned in the strongest performance with +12.5% growth. Strong commodity-driven economic growth in Latin America is the driving force, said IATA.

“The airline sector is in trouble. Losses this year could reach US$6.1 billion, more than wiping out the US$5.6 billion that airlines made in 2007. Falling demand and rising costs are re-shaping the industry,” said Bisignani. “To survive the crisis, urgent action is needed. Airports and air navigation service providers must come to the table with efficiencies that deliver cost savings. Labour must understand that efficiency is the only path to job security. And governments must stop crazy taxation and give airlines the freedom to merge and consolidate where it makes business sense.”

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