Airlines To Sell Even Fewer Seats This Spring - IATA
Airlines will sell fewer seats this spring as a result of the economic malaise causing would-be passengers to stay at home, the International Air Transport Association said.
While air cargo is unlikely to keep weakening as dramatically as it has been, "passenger travel has not found a floor and is now declining at a faster rate", the Geneva-based industry body said on Monday.
"The deepening recession has cut away the foundations for travel demand," IATA said in its latest financial snapshot.
Last month's passenger traffic figures showing a 10 percent drop over February 2008 levels may have been distorted because Chinese New Year occurred in February this year, causing a spike in the number of people traveling.
Airline stock prices are down 18 percent so far this year, and 64 percent lower than their late-2007 peak, according to IATA, which represents 230 carriers.
"Much of the recent bad news on fourth-quarter profits and slumping traffic is now 'in the price'," said IATA, which has estimated airlines would lose USD$4.7 billion this year, after posting USD$8.5 billion losses in 2008.
Traditional carriers with high fixed costs have little room to maneuver when passenger and cargo revenues fall sharply -- a risk-inducing financial effect known as operating leverage.
As a result, airlines have cut tens of thousands of jobs and more than 40 carriers have been grounded in the past 18 months, crippled first by high fuel prices, then a slump in passenger demand, and now a collapse in cargo.
But continued low fuel prices should soften the blow for carriers which have cut fares in an attempt to keep people traveling throughout the downturn.
IATA's report said crude oil prices may fall even further before they start to rebound, depending on when the world economy starts to pick up steam.
While air cargo volumes are unlikely to keep plummeting 20 percent or more, as they have in the past three months, IATA said it was also unclear when freight would regain strength.
"A possible floor has been found but, like oil, a further downward leg cannot yet be ruled out until economic recovery is in sight," its report said.
Almost half of international freight goes by air, and those cargo volumes are a key barometer of the health of global trade.
