2009: Worst Year Ever for Air Transport Industry in Post-war Era

IATA reports record declines in freight traffic as industry copes with recession, faces continued billions in losses; increased security costs weigh

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Geneva — February 3, 2010 — International scheduled air traffic suffered its worst decline in the post-war era last year, as air freight fell 10.1 percent, with an average load factor of 49.1 percent, and the industry is poised to lose billions of dollars this year, according to figures released by the International Air Transport Association (IATA).

The IATA's report on December and full-year 2009 demand statistics showed the industry ending 2009 with the largest ever drop. In addition to the fall in freight, passenger demand for the full year was down 3.5 percent, with an average load factor of 75.6 percent.

"In terms of demand, 2009 goes into the history books as the worst year the industry has ever seen," said Giovanni Bisignani, IATA's director general and CEO. "We have permanently lost 2.5 years of growth in passenger markets and 3.5 years of growth in the freight business."

In December freight capacity grew 0.6 percent above year-ago levels, while international passenger capacity fell 0.7 percent over the same period. Yields have started to improve with tighter supply-demand conditions in recent months, but they remained 5-10 percent down on 2008 levels.

"Revenue improvements will be at a much slower pace than the demand growth that we are starting to see. Profitability will be even slower to recover, and airlines will lose an expected $5.6 billion in 2010," said Bisignani.

Seasonally adjusted demand figures for December compared to November 2009 indicate a 1.6 percent rise in passenger traffic, while freight remained basically flat with a 0.2 percent decline.

International Freight Demand

December 2009 freight demand showed a 24.4 percent improvement on December 2008, with a load factor of 54.1 percent. This improvement is exaggerated by the exceptionally weak performance in December 2008, which was the low point on the cycle.

Freight demand is still 9 percent lower than the peak in early 2008, but optimism is returning to the industry as purchasing managers survey indicators reached a 44-month high in December, pointing towards increased freight volumes in the coming months.

Asia-Pacific carriers accounted for over 60 percent of the increase in international air freight markets over the past 12 months — outperforming their 45 percent market share. Despite this improvement, Asia-Pacific carriers' freight volumes remain 8 percent below peak levels.
Elsewhere, European carriers remain 20 percent below 2008 peak levels, reflecting the glacial pace of economic recovery in Europe compared to Asia-Pacific. Middle East carriers and Latin American carriers are smaller market participants, but ended the year better than peak levels by 7 percent and 21 percent respectively.

International Passenger Demand

December 2009 passenger demand recorded a 4.5 percent improvement compared to December 2008, with a load factor of 77.6 percent. While this is an 8.4 percent demand improvement from the February 2009 low point, it is still 3.4 percent below the early 2008 peak.

Carriers in Asia-Pacific, Europe and North America recorded year-on-year declines in passenger demand of 5.6 percent, 5.0 percent and 5.6 percent respectively in 2009. Asia-Pacific carriers stand out as benefitting most from the year-end upturn, with an 8.0 percent year-on-year improvement in December. This reflects their 35 percent contribution to the year-end rise boosted by the significant economic upturn in the region.

By contrast, European carriers saw a 1.2 percent decline, and North American carriers declined by 0.4 percent. While both North American and European carriers saw demand improvements in the first half of the year, the second half was basically flat.

"The industry starts 2010 with some enormous challenges," said Bisignani. "The worst is behind us, but it is not time to celebrate. Adjusting to 2.5-3.5 years of lost growth means that airlines face another Spartan year focused on matching capacity carefully to demand and controlling costs."

Security Costs Continue to Weigh

Bisignani added that the industry also faces a renewed challenge on security as a result of the attempted bombing of a Northwest flight into Detroit on Christmas Day. Bisignani called the Obama administration's approach to address the security issues "encouraging," and he noted that Homeland Security Secretary Janet Napolitano had visited IATA's offices in Geneva to engage industry to find solutions.

"We agreed that governments and industry must cooperate and we are preparing for a meeting in the coming weeks to follow-up on our recommendations which focused on finding more efficient ways to implement intelligence-driven and risk-based security measures," said Bisignani.

He added: "Governments and industry are aligned in the priority that we place on security. But the cost of security is also an issue. Globally, airlines spend $5.9 billion a year on what are essentially measures concerned with national security. This is the responsibility of governments, and they should be picking up the bill."