The International Air Transport
Association (IATA) announced their findings for May 2009
showing passenger demand declining by 9.3% compared to
the same month last year while freight demand was down
by 17.4%. International passenger load factors stood at
71.2%, down from 74.5% from May 2008.
The 17.4% decline in international
cargo demand is a relative improvement compared to the
21.7% drop in April. Since December 2008, cargo demand
has been moving sideways in the -20% range. This is one
of the first physical signs of the economic recovery
being anticipated in equity markets.
International Passenger Demand
International passenger demand
weakened from the -3.1% recorded in April to -9.3% in
May. But both the past two months have been slightly
stronger than the 11.1% decline reached in March, even
after adjusting for distortions caused by the timing of
Easter. This indicates that worst may now have been
reached. However, the capacity adjustment of -5.0% in
May was not in keeping with the fall in demand during
the same month. Moreover, although the impact of the
recession appears to be stabilizing, the strong impacts
from debt and low asset prices are expected to weaken
and further delay any significant recovery.
Rock
Bottom
“We may have hit bottom, but we are a
long way from recovery”, says Giovanni Bisignani, IATAs
Director General and CEO. “Capacity is not aligned with
demand. Passenger load factors dropped 3.3% over the
last 12 months. The impact on revenue is dramatic. After
a 20% fall in international passenger revenue in the
first quarter, we estimate that the drop would
accelerate by as much as -30% in May. This crisis is the
worst we have ever seen”, Bisignani says.
The Impact of Swine Flu
May was the first full month to feel
the impact of the Influenza A(H1N1) on travel. Mexican
carriers saw their traffic fall almost 40% in May. Latin
American carriers saw their traffic decline by 9.2% in
the same month compared to the previous year. Against a
capacity increase of 0.2%, the load factor plummeted to
64.7%. That is a 6.7 percentage point drop compared to
May 2008 and the lowest load factor among all the
regions. The IATA estimates that the global impact of
Influenza A(H1N1) on global travel patterns in May was a
1% drop in passenger traffic.
Memories of SARS
Asia Pacific carriers recorded a
14.3% fall in demand. While capacity adjustments by the
regions carriers were the most severe (-9.3%), they did
not keep pace with the fall in demand driven by weak
economies and the impact of Influenza A(H1N1) on the
region with the most vivid memories of the SARS crisis.
North American carriers posted a
10.9% fall in passenger demand, considerably worse than
the 4.2% fall in April. This was the result of weak
demand towards Latin American destinations affected by
flu strain along with significant recession-driven drops
in both trans-Atlantic and trans-Pacific markets.
European carriers, in additional to weak long-haul
markets, saw some loss of market share to European low
cost carriers whose traffic grew by 2.1%, while the
network carriers reported a 9.4% decline. African
carriers saw a slight improvement of a 6.0% fall in
demand in May, compared to a 7.1% decline in April while
Middle Eastern carriers bucked the declining trend with
9.5% growth in demand and a 14.5% expansion of capacity.
International Air Freight
In May, freight volumes rose by
around 3% above April levels as manufacturers began to
add to their product inventories in anticipation of an
economic recovery. However, inventories remain 10-15%
higher than normal in relation to sales levels,
indicating that a significant recovery is not expected
in the short term. Surveys of purchasing managers
indicate we could experience a further improvement in
air freight demand during June and July to levels that
are 12-15% below last years levels.
Most regions were equally affected in
the severity of the freight declines. Latin American
carriers were the worst performers with a 21.0% fall,
followed by Africa (-20.0%), Europe (-19.2%), North
America (-18.8%), and Asia Pacific (-18.1%). Middle East
carriers were the exception with a 3.7% fall.
Capacity adjustments in freight
markets have been catching up to declines in demand.
Freight load factors are 3.6% lower than one year ago.
Freight yields fell by 17% in the first quarter, which
resulted in a 35% drop in revenues. Given the continuing
downward pressure on yields, even the improvement in
volumes in May will likely come without a corresponding
improvement in revenues.
An Abuse of Monopoly Power
