The International Air Transport Association (IATA) announced international scheduled traffic statistics for July which showed continued strengthening of demand for both passenger and cargo traffic. Compared to July 2009, international passenger demand was up 9.2% while international scheduled freight traffic showed a 22.7% improvement.

These year-on-year comparisons for July were less than the June growth data showing 11.6% and 26.6% increases for passenger and cargo traffic, respectively. The apparent slowdown was entirely due to the fact that by July 2009 traffic was already starting to recover. After adjusting for seasonality, the improvement in demand was faster month-to-month in July than it was in June.

It is clear that the recovery has entered a slower phase. During the second half of 2009, demand was rebounding at an annualized rate of 12% for passenger and 28% for cargo. In the year to July, the annualized growth rates had dropped to 8% for passenger and 17% for air freight. However, this is still considerably above the industry’s traditional 6% growth trend.

“The recovery in demand has been faster than anticipated. But, as we look towards the end of the year, the pace of the recovery will likely slow. The jobless economic recovery is keeping consumer confidence fragile, particularly in North America and Europe. This is affecting leisure markets and cargo traffic. Following the boost of cargo demand from inventory re-stocking, further growth will be largely determined by consumer spending which remains weak,” said Giovanni Bisignani, IATA’s Director General and CEO.

Passenger

* July global passenger traffic was 3% higher than the pre-crisis levels of early 2008.
* Asia-Pacific carriers outperformed the industry average with a 10.9% growth in July. This is consistent with the region’s 10.6% growth measured year-to-date. A July capacity increase of less than half the demand growth (5.1%) pushed load factors higher. Leading the industry recovery, the region’s carriers are expected to report a profit of US$2.2 billion. This will be the largest gain in dollar terms in 2010 compared to 2009.
* European airlines, beleaguered by the region’s weak economy, saw little growth when the recovery took off in the second half of 2009. These airlines are now benefiting from long-haul expansion in 2010. In July, passenger demand was up by 6.2% over the same month in 2009. But the region’s slow start in the recovery process has seen it deliver the weakest demand performance among all the regions over the first seven months of the year (+3.6%).
* North American carriers recorded a 7.9% improvement in passenger demand in July over the same month in the previous year. Over the first seven months of the year, the region’s carriers recorded a 6.3% increase, but kept capacity expansion to just 1.0%, raising load factors to 82.0% and producing strong gains in unit revenues that will support the region’s return to profitability this year.
* African airlines are now benefiting significantly from the economic and travel upturn, outperforming the industry with 13.0% growth in passenger demand in July, which is consistent with the year-to-date improvement of 13.1%. Capacity is quickly coming back into the market with a 10.4% increase in July, limiting improvements in both load factors and financial performance.
* Latin American carriers outperformed the global average with passenger growth of 14.2% in July (10.9% for the first seven months of the year). Faster capacity additions have seen load factors drop, which will limit gains in financial performance.
* Middle Eastern carriers continue to add the largest amount of capacity (12.8% in July and 13.2% over the first seven months of the year). The region’s carriers have managed to increase demand at even higher levels (16.8% in July and 19.4% over the first seven months of the year). Load factors and financial performance will record improvements this year.

Cargo

* July global cargo demand was 4% higher than pre-crisis levels in early 2008.
* A slowdown in air freight markets is expected in the second half of the year as the economic cycle moves into a new phase. Extraordinary freight growth rates in late 2009 and early 2010 were supported by businesses re-stocking their inventories. With the re-stocking cycle completed, air freight demand will be driven by consumer spending and business capital expenditure. Weak consumer confidence in Europe and North America will be a negative factor. But strengthening corporate profits are supporting an increase in capital expenditure that could continue to drive robust freight growth.
* The two-speed recovery continues to see weak growth by European carriers of 12.1% in July, less than half the 25.3% increase by Asia-Pacific carriers or the 27.1% growth recorded by North American carriers.

“Improving demand is an important component of the recovery. But it must translate to the bottom line. The anticipated 2010 profit of $2.5 billion is only a 0.5% return on revenues. Hence, the financial situation of the industry remains fragile. We must go beyond recovery to secure sustainable profitability at levels exceeding the 7-8% cost of capital. For this, we need a change in the industry’s structure,” said Bisignani.

“Costs are a critical element. This year has been marked by strikes and threats of strikes at airlines, and with airports and air navigation service providers. Avoiding strikes at BAA and AENA, Spain’s provider of air navigation services, were major accomplishments. We are all in this together—including all our partners in the value chain and those who work in this financially fragile industry. It is not the time for strikes. We must work together to secure our future by finding solutions to reduce costs,” said Bisignani.

Bisignani also noted the need for a regulatory structure that facilitates consolidation across political borders. “The crisis has seen consolidation in Europe and the US. This month’s merger announcement by LAN and TAM brings Latin America into the picture. And trans-national brands are serving customers effectively in many parts of the world. But we remain an industry of over a thousand players with only very limited opportunities to consolidate as a result of the antiquated bilateral system’s restrictions on ownership. The business realities of the industry are changing. It is critical that governments find a modern regulatory structure that is free of outdated ownership restrictions and able to facilitate opportunities for consolidation globally—something that other industries take for granted,” said Bisignani.

View full July traffic results
IATA press release No. 36, Sydney, 25 August2010

The International Air Transport Association (IATA) called on European governments and air navigation service providers to urgently develop more precise procedures to identify ash contaminated air space and allow more flights. The call came in the wake of 1,000 flight cancellations on Monday (17 May) as a result of the continued volcanic eruptions in Iceland.

“This problem is not going away any time soon. The current European-wide system to decide on airspace closures is not working. We welcome the operational refinements made by the Volcanic Ash Advisory Centre (VAAC) in their theoretical model but we are still basically relying on one-dimensional information to make decisions on a four-dimensional problem. The result is the unnecessary closure of airspace. Safety is always our number one priority. But we must make decisions based on facts, not on uncorroborated theoretical models,” said Giovanni Bisignani, IATA’s Director General and CEO.

Bisignani noted some successful exceptions which provide examples to follow. “France has been able to safely keep its airspace open by enhancing the VAAC data with operational expertise to more precisely determine safe fly zones. Today, the UK Civil Aviation, working with the UK NATS (the air navigation service provider), announced another step forward by working with airlines and manufacturers to more accurately define tolerance levels while taking into account special operational procedures. Both are examples for other European governments to follow,” said Bisignani.

Bisignani called for (1) more robust data collection and analysis (2) a change in the decision making process and (3) urgency in addressing the issues.

Data Collection and Analysis
“Numbers show that the current system is flawed. Over 200,000 flights have operated in European airspace identified by the VAAC as having the potential presence of ash. Not one aircraft has reported significant ash presence and this is verified by post-flight aircraft and engine inspections. We must back the theory with facts gathered by aircraft to test ash concentration. France and the UK are showing that this is possible. If European civil aviation does not have the resources, it should look to borrow the test aircraft from other countries or military sources,” said Bisignani.

Changing the Decision-making Process
“We have lost confidence in the ability of Europe’s governments to make effective and consistent decisions. Using the same data, different countries have come to different conclusions on opening or closing airspace,” said Bisignani.

“Ultimately the industry needs a decision-making process for ash clouds similar to the one used for all other operational disruptions. Every day airlines make decisions whether to fly or not to fly in various weather conditions. Airlines collate the information available and make informed decisions placing safety first and with full access to all the latest weather reporting. Why should volcanic ash be any different?” said Bisignani.

In the US, which has a lot of experience with volcanic activity, the government identifies a no-fly zone where ash concentration is the highest. For all other areas, it is the responsibility of the airline to decide to fly or not based on the various data sources available. “The US has well-established, safe and effective procedures for tracking the hazards of volcanic ash. In recent years, the industry had no recorded safety incidents from volcanic activity in US airspace. Europe has a lot to learn,” said Bisignani.

Urgency
“Volcanic ash is a new challenge for European aviation. We can understand that systems need to be developed to cope. But what is absolutely inexcusable is the failure of Europe’s governments to act urgently and collectively to provide real leadership in a crisis. We have vast amounts of data from over 200,000 safe flights ready for analysis to support an urgent review of the current processes. The UK is finally moving in the right direction. But what about the other affected European governments? The next transport ministers meeting is scheduled for June 24. What kind of leadership waits more than a month to make crisis decisions? European businesses are dependant on air travel and passengers certainly cannot wait that long for initiatives like the UK’s to be implemented continent-wide,” said Bisignani.

To enhance the industry’s long-term ability to address volcanic ash issues, Bisignani is traveling to Montreal for urgent meetings with the International Civil Aviation Organization (ICAO). “IATA and ICAO have been working intensely on this issue since the crisis first struck in April. IATA is strongly supporting the ICAO task force which is reviewing ash tolerance thresholds with states, operators, manufacturers and the scientific community. The responsibility of manufacturers is critical in providing performance information to back decisions,” said Bisignani.

Tomorrow Bisignani will meet Roberto Kobeh-Gonzales, President of the ICAO Council and Raymond Benjamin, ICAO Secretary-General. “It is important that we act urgently and globally to better deal with this crisis and to lay a solid foundation for better decision making in future eruptions. Even as Europe stumbles with its fragmented approach, IATA is working with the global community through ICAO and by tapping into the experience of leading regulators like the US FAA to facilitate harmonized solutions,” said Bisignani.

IATA press release No. 20, Geneva, 18 May 2010

The International Air Transport Association (IATA) announced its full support for Spain’s transport minister Jose Blanco and Vice President of the European Commission Siim Kallas in their call to fast track implementation of the Single European Sky. The issue is set to be discussed at an extraordinary meeting of Europe’s Transport Council on 4 May 2010.

IATA’s Director General and CEO, Giovanni Bisignani made the following statement:

“I applaud the leadership of Minister Blanco and Vice President Kallas to urgently fast track implementation of the Single European Sky. The volcanic ash crisis that paralyzed European air transport for nearly a week made it crystal clear that the Single European Sky is a critical missing link in Europe’s infrastructure.

We have been discussing the Single European Sky for decades. It was a priority of the European Commission as far back as the early 1990’s when I was Chairman of the Association of European Airlines. The technical plans are in place. The 4 May meeting must back up the technical preparations with an implementation time line for a fully integrated Single European Sky and the political will to achieve it.

The Single European Sky is much broader than a crisis management mechanism. It will improve Europe’s competitiveness and environmental performance. The inefficiency of the current system is a EUR 5 billion burden on Europe’s economy and wastes 16 million tonnes of CO2 in delays and indirect routings.”

IATA press release No.17, Geneva, 23 April 2010

Volcano Crisis Cost Airlines $1.7 Billion - IATA Urges Measures to Mitigate Impact

Berlin - The International Air Transport Association (IATA) estimated that the Icelandic volcano crisis cost airlines more than $1.7 billion in lost revenue through Tuesday—six days after the initial eruption. For a three-day period (17-19 April), when disruptions were greatest, lost revenues reached $400 million per day.

“Lost revenues now total more than $1.7 billion for airlines alone. At the worst, the crisis impacted 29% of global aviation and affected 1.2 million passengers a day. The scale of the crisis eclipsed 9/11 when US airspace was closed for three days,” said Giovanni Bisignani, IATA’s Director General and CEO.

IATA noted there are some cost savings related to the flight groundings. For example, the fuel bill is $110 million a day less compared to normal. But airlines face added costs including from passenger care. “For an industry that lost $9.4 billion last year and was forecast to lose a further $2.8 billion in 2010, this crisis is devastating. It is hitting hardest where the carriers are in the most difficult financial situation. Europe’s carriers were already expected to lose $2.2 billion this year—the largest in the industry,” said Bisignani.

Mitigating the Financial Impact

“As we are counting the costs of the crisis we must also look for ways to mitigate the impact. Some of our airport partners are setting industry best practice. London Heathrow and Dubai are waiving parking fees and not charging for repositioning flights. Others airports must follow,” said Bisignani.

But the larger role is for governments. Bisignani made four specific requests for regulatory relief:

Relax Airport Slot Rules: IATA urged that rules on take-off and landing slot allocation (use it or lose it) be relaxed to reflect the extra-ordinary nature of the crisis.
Lift Restrictions on Night Flights: IATA urged governments to relax bans on night flights so carriers can take every opportunity to get stranded passengers back home as soon as possible.
Address Unfair Passenger Care Regulations: “This crisis is an act of god—completely beyond the control of airlines. Insurers certainly see it this way. But Europe’s passenger rights regulations take no consideration of this. These regulations provide no relief for extraordinary situations and still hold airlines responsible to pay for hotels, meals and telephones. The regulations were never meant for such extra-ordinary situations. It is urgent that the European Commission finds a way to ease this unfair burden,” said Bisignani.

Bisignani also urged governments to examine ways for governments to compensate airlines for lost revenues. Following 9/11, the US government provided $5 billion to compensate airlines for the costs of grounding the fleet for three days. The European Commission also allowed European states to provide similar assistance.

“I am the first one to say that this industry does not want or need bailouts. But this crisis is not the result of running our business badly. It is an extra-ordinary situation exaggerated with a poor decision-making process by national governments. The airlines could not do business normally. Governments should help carriers recover the cost of this disruption,” said Bisignani.

Re-Opening Air Space

On Monday, the European Commission announced revised measures for handling airspace closures, following widespread criticism of their methodology.

“Airspace was being closed based on theoretical models not on facts. Test flights by our members showed that the models were wrong. Our top priority is safety. Without compromising on safety, Europe needed to find a way to make decisions based on facts and risk assessment, not theories,” said Bisignani.

“The decision to categorize airspace based on risk was a step in the right direction. Unfortunately, not all states are applying this uniformly. It is an embarrassing situation for Europe, which after decades of discussion, still does not have an effective Single European Sky. The chaos and economic losses of the last week are a clarion call to Europe’s political leaders that a Single European Sky is critical and urgent,” said Bisignani.

IATA press release No. 15, 21 April 2010

The International Air Transport Association (IATA) announced that February 2010 international scheduled air traffic showed continued strengthening of demand. Compared to February 2009, passenger demand was up 9.5%, while cargo demand grew 26.5%.

These are strong gains, but it must be noted that February 2009 marked the bottom of the cycle for passenger traffic during the global economic recession. Passenger demand must recover by a further 1.4% to return to pre-crisis levels. Cargo hit bottom in December 2008, with little improvement realized by February 2009. Cargo traffic, which plunged much further than passenger demand, has a further 3% to recover in order to return to pre-crisis levels.

“We are moving in the right direction. In two to three months, the industry should be back to pre-recession traffic levels. This is still not a full recovery. The task ahead is to adjust to two years of lost growth,” said Giovanni Bisignani, IATA’s Director General and CEO.

The highlight for February was improved load factors which stood at 75.5%. Considering that February is traditionally the weakest month for travel, and if seasonally adjusted, this translates to an all-time record February load factor of 79.3%. While demand increased by 9.5%, supply was held back to just 1.9%. Airlines are maintaining normal aircraft utilization on short-haul fleets but long-haul utilization is down over 8% compared to 2008 levels. The resulting increase in unit costs for long-haul operations may delay the positive impact of stronger demand to the bottom line.

International Passenger Demand
Regional demand patterns continue to reflect the asymmetrical nature of the economic rebound.

European carriers posted the weakest growth at 4.3%. This is the result of sluggish home economies, rising unemployment and labor strikes. This region saw a capacity reduction in February (-0.5%).

North American airlines posted weak growth of 4.4%. Having cut capacity deeply during the recession (February 2010 capacity was 3.0% below 2009 levels), this is to be expected. Consumers continue to pay down debt rather than increase spending, keeping demand for air travel comparatively weak.

In contrast to Europe and North America, Asia-Pacific carriers posted strong traffic growth of 13.5%, which was partly boosted by the timing of the Chinese New Year. Compared with the mid-2009 low there has been a 19% rebound.

Middle Eastern airlines recorded traffic growth of 25.8%--the strongest of any region. Travel markets continue to develop within the region creating new demand. Successful competition on long-haul connections to Asia over Middle Eastern hubs has improved market share for the region’s carriers.

Latin American carriers posted growth of 8.5% on the strength of the performance of the region’s economies.

African airlines have also benefited from strong local economies with a 9.8% growth. However, capacity is also coming back fast (+9.2%) so airlines in this region continue to see the weakest load factors.

International Cargo Demand

European airlines are benefiting least from the strong upturn in air freight volumes, with year-on-year growth of just 7.2% in February, compared to 26.5% on average.

Despite the sluggish US economy, North American airlines have seen a rebound (+34.1%) equivalent to those experienced by Asia-Pacific (+34.5%) and Latin American airlines (+41.9%). While US GDP expanded at 5.9% during the fourth quarter, consumer spending was up just 1.7%. The bulk of the expansion is attributed to businesses restocking inventories.

The global strong air freight upturn has been largely driven by the business inventory cycle. We can expect this part of the cycle to wear-out in the second half of the year when inventories reach normal levels. From that point, we can expect slower growth as air freight will be driven by consumer spending and world trade growth.

“While the numbers are improving, the year has started with two disappointments,” said Bisignani. “The first is in Europe. We anticipate Europe to post US$2.2 billion in losses this year—the highest among the regions. Weak European passenger and freight demand is in line with our forecast. It is disappointing to see labor at European airlines engaging in strikes when the fragile industry needs to focus on improving efficiency and reducing costs.”

“The second is the failure to address ownership issues in second stage talks on open skies between the EU and the US. Last week’s agreement was not a step backwards. The gains from the stage one talks have not been lost. But the two sides missed an opportunity at this critical time to give airlines the much needed normal commercial freedom to access global capital markets without the limitations of outdated foreign ownership restrictions embedded in the current bilateral system,” said Bisignani.

IATA’s Agenda for Freedom continued to gain support with Kuwait, Bahrain and Lebanon endorsing its multilateral Statement of Policy Principles on liberalization in the last month. Chile, Malaysia, Panama, Singapore, Switzerland, the US, the United Arab Emirates and the European Commission were the original signatories in November 2009.

“Liberalization must not fall off the agenda as economies improve. To move forward, labor and politicians must come on board by understanding a fundamental reality. Restrictions on ownership do not protect jobs. On the contrary they put jobs at risk. As we are seeing with the two-speed recovery, ownership restrictions limit growth by preventing airlines from growing into efficient global businesses that can take advantage of global opportunities,” said Bisignani.

View February traffic results

IATA press release No 10, 30 March 2010