Tuesday, October 28, 2008

'Crisis deepens' as global air traffic slows for first time in 5 years

Global airline losses may be even deeper than the International Air Transport (Iata’s) initial forecast of $5,2-billion, as passenger and cargo traffic dropped sharply in September, the organisation warned on Friday.

Global passenger traffic fell by 2,9%, which was the first drop in five years. Cargo traffic recorded its worst decline - 7,7% - since the technology bubble burst in 2001.

“The deterioration in traffic is alarmingly fast-paced and widespread. We have not seen such a decline in passenger traffic since SARS [severe acute respiratory syndrome] in 2003,” Iata director general and CEO Giovanni Bisignani said in an emailed statement.

“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.”

While all major regions reported that passenger traffic had shrunk, African carriers posted the largest decline in traffic, falling by 7,8%.

Asia Pacific carriers reported a 6,8% drop in traffic, as the economies of the region’s two major growth markets – China and India – slowed and Japan saw industrial production drop 5% in August.

European carriers also recorded lower traffic, as the region’s economies head for recession, and the steady 5% international growth from North American carriers turned into a 0,9% contraction.

Middle Eastern carriers, which recorded double-digit growth for years, saw traffic growth turning to a negative 2,8%.

“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 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 is facilitating a discussion among 15 progressive governments on the future regulatory structure of international air transport.