Alarming drop for September international traffic
Oct. 27, 2008, Istanbul, Turkey - The International Air Transport Association (IATA) announced global international traffic results for September.
October 27, 2008 By Carey Fredericks
Oct. 27, 2008, Istanbul, Turkey – The International Air Transport Association (IATA) announced global international traffic results for September. Passenger traffic declined 2.9% while cargo traffic dropped 7.7% compared to the same month in 2007. International load factors tumbled by 4.4% percentage points from August to 74.8% in September.
"The deterioration in traffic is alarmingly fast-paced and widespread. We have not seen such a decline in passenger traffic since SARS in 2003," said Giovanni Bisignani, IATA's Director General and CEO. "Even the good news that the oil price has fallen to half its July peak is not enough to offset the impact of the drop in demand. At this rate, losses may be even deeper than our forecast US$5.2 billion for this year," said Bisignani.
This is the first time since the SARS crisis in 2003 that global passenger traffic has shrunk. Capacity cuts were not able to keep pace with the fall in demand. September load factors in all regions fell compared to August.
For September, all major regions reported that passenger traffic shrank, with the exception of Latin American carriers which saw an increase of 1.7%. Even this is shockingly down from the 11.9% growth of the previous month.
Up to August, the drop in international passenger traffic was isolated to Asia Pacific carriers. The economies of the region's two major growth markets – China and India – slowed and Japan saw industrial production drop 5% in August. The sharp downturn in world trade disproportionately impacted Asia-Pacific carriers with a 6.8% drop in traffic in September.
The steady 5% international growth of North American carriers turned into a 0.9% contraction. European carriers saw traffic drop from last year (-0.5%) as the region's economies head for recession.
After years of double-digit growth, passenger traffic by Middle Eastern carriers turned to a negative 2.8%. While the region's oil-based economy remains strong, the large portion of transit traffic exposes the region's carriers to the global economic weakness.
African carriers posted the largest decline in traffic (-7.8%), a continuation of the previous month's trend.
This is the worst decline since the technology bubble burst in 2001.
Declines in air freight have slowed year-to-date growth to 0.1%, with all regions except the Middle East and Africa reporting negative results. The most alarming drop was with Asia Pacific carriers – the largest players in the market. The region's carriers reported a 10.6% decline. Europe and North American carriers, which had seen flat growth through August saw cargo traffic fall 6.8% and 6.0% respectively.
"The industry crisis is deepening – along with the crisis in the global economy. Airlines, like all other businesses, are facing enormous challenges. But unlike other companies, they are denied some basic commercial freedoms – access to markets and to global capital – that could help them manage their business in this difficult time," said Giovanni Bisignani.
The web of 3,500 bilateral air service agreements that govern international air transport denies market access until specifically agreed. And the ownership clauses that are contained in these agreements preclude mergers across borders.
"Look at what the banking industry is doing. They are taking government handouts. They are accessing global capital. And we have seen mergers without anybody asking to see the investors' passports. Airlines are not asking for handouts. But today's crisis highlights the need for airlines to be able to run their businesses like normal global businesses," said Bisignani from Istanbul on the eve of the Agenda for Freedom Summit.
IATA has taken the extra-ordinary step of facilitating a discussion among 15 progressive governments on the future regulatory structure of international air transport. IATA circulated a paper among these governments examining solutions within the bilateral system that could be quickly implemented to expand opportunities for access to markets and to global capital.
"I hope that the Agenda for Freedom Summit will conclude as a successful discussion that sparks a process of change by governments. We are not asking for anything other than the basic freedoms to do business that other industries take for granted," said Bisignani.