Airline Sales Are Lowest Since 2003

[August 4th 2008]

The airline industry is in trouble and the situation will only get worse warns the International Air Transport Association.

International air traffic data for June released by IATA shows that passenger demand growth fell to 3.8%, the lowest recorded level since 2003. Passenger load factors also fell - to 77.6% - a full 1.2% lower than in June last year.

"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," comments IATA director general and CEO, Giovanni Bisignani.

Capacity growth by airlines of 5.5% outstripped demand from passengers, which was responsible for load factors declining. The fall in passenger demand in Europe was even more pronounced than the worldwide average. Demand dropped to 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," IATA suggests. The fall in passenger demand was even more dramatic in North America. Growth in June was just 4.4% - compared to 8.2% in May. Domestic traffic in the USA contracted by almost 4%. Airlines in the Asia Pacific region saw their international passenger growth fall to 3.2%, down from 4.5% in May.

Growth for Middle Eastern airlines was still healthy at 9.6%, but this was down from 12.8% in May and 18.1% in June 2007. But the best performance was by Latin American airlines, where growth was 12.5%.

"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," says 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," he concludes.

Written by: Nick Purdom

 

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