Traffic Slowdown Continues

International passenger demand growth slowed to 1.3%, following disappointing growth of 1.9% in July. Passenger load factors fell to 79.2% a sharp drop-off from the 81% recorded during the same period last year as capacity growth outpaced demand. International freight traffic saw its third consecutive month of contraction with a 2.7% decline following drops of 1.9% in July and 0.8% in June. Passenger traffic grew by 5.4% in the first half of the year. That slowed to 1.9% in July and 1.3% in August. The contrast between the first half of the year and the last two months is stark, said Giovanni Bisignani, IATAs Director General and CEO. The slowdown has been so sudden that airlines cant adjust capacity quickly enough. While the drop in the oil price is welcome relief on the cost side, fuel remains 30% higher than a year ago. And with traffic growth continuing to decline, the industry is still heading for a US$5.2 billion loss this year. Air freight has declined for the past three months, led by Asia Pacific carriers that posted a 6.5% decline in July and a 6.8% decline in August. Airlines carry 35% by value of the goods traded internationally. The three-month decline - led by weakness in Asia-Pacific markets - is a clear indication that global trade is slowing down. This shows that the impact of the financial crisis is broad geographically and will worsen before it gets better, said Bisignani. Asia Pacific carriers reported a 3.1% contraction, following a 0.5% decline in July. Economic distortions surrounding the Olympics in China and a weakening Japanese economic outlook contributed to the decline. While some recovery in this weak performance is expected in coming months, clearly the regions economies are feeling the impact of the turmoil in the financial markets. Middle Eastern carriers saw traffic growth drop to 4.3% following 5.3% in July and well below the 10.6% growth recorded during the first 6 months of the year. In contrast, international passenger traffic carried by North American airlines accelerated from 4.2% growth in July to 5.2% in August, in Latin America from 8.1% to 11.9% and in Europe from 1.3% to 1.6%. August is usually the second strongest month of the year, but the 79.2% load factor achieved was 1.8% points lower than last year although scheduled capacity is planned to slow very sharply to the point where it barely grows by the end of the year. The 6.8% decline in international freight shipped by carriers in the Asia Pacific region had the greatest impact as they comprise 45% of the global air cargo markets. The other big market players also showed weakness. European carriers experienced a 0.9% decline, while US carriers reported weak growth of 0.8%. Sharp declines in freight traffic in Latin America (-13.2%) reflect restructuring in Brazil with cuts in capacity. The industry crisis is deepening and no region is immune. Urgent measures are needed. From taxation to charges and operational efficiencies, all areas impacting the business must be examined for ways to reduce costs and drive efficiencies. Its a matter of survival, said Bisignani. Bisignani noted significant progress in Brazil where a Presidential approval for the removal of a fuel tax for international flights was published on 26 September. After a two-year campaign, this is great news and the US$411 million savings over the next four years could not be better timed. The challenge is for other governments to follow Brazils example, conform with global standards and free the industry of crazy taxation. This is particularly true of India. Its carriers will post the largest losses outside of the US - US$1.5 billion this year - and they are being crippled by enormous taxation on fuel, particularly in domestic markets, said Bisignani.