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Airlines bore the brunt of a gloomy economy

FINANCIAL STANDARD
By | Dec 29th 2009 | 3 min read
By | December 29th 2009
FINANCIAL STANDARD

By John Oyuke

Air transport recorded the worst ever performance on the back of poor global economy, International Civil Aviation Organisation (ICAO) says.

According to preliminary figures released by the organisation, scheduled passenger traffic on airlines of member States declined by 3.1 per cent this year compared to last year.

The decline is the largest on record for the industry and reflects the one per cent drop in the world gross domestic product for the year, the first negative growth of the global economy since the great depression in 1929.

In 2001, the organisation observed passenger traffic fell by 2.9 per cent, due to the September 11 terrorist attack on the US.

Traffic decline

Statistics provided by ICAO member States indicate that international traffic fell by about 3.9 per cent, while domestic traffic by 1.8 per cent. International and domestic traffic declined in all regions except for the Middle East, where carriers posted a strong 10 per cent growth.

The double-digit domestic passenger traffic growth in the emerging markets of Asia and Latin America, and the relative strong performance of Low Cost Carriers (LCCs) in North America, Europe and Asia Pacific, helped curtail the severity of the decline in total traffic. Capacity offered by airlines, expressed in available seat kilometres (ASKs), declined by 3.1 per cent, in response to the declining traffic.

The 190-membership organisation, however, says in line with the improving economic situation in many parts of the world, a moderate recovery is expected for 2010 with a 3.3 per cent traffic growth forecast.

"The momentum is expected to continue in 2011, on the way to full recovery and traditional growth trends of 5.5 per cent per year," ICAO said. This year, cargo traffic plummeted by 15 per cent in terms of total freight tonne kilometres (FTK) compared to last year, significantly worse than the 6.2 per cent drop in 2001.

The organisation says the magnitude of the change is also indicative of the huge decrease in world trade volumes due to the global economic downturn.

Cargo traffic on Asia Pacific carriers, which accounts for some 36 per cent of global FTKs, declined by about 14 per cent, while traffic on European and North American carriers that each account for 25 per cent share of global FTKs dropped by 18 and 17 per cent respectively.

At the same time, International Air Transport Association (IATA), the industry’s trade group has maintained its forecast of a $11 billion net loss for 2009.

"The world’s airlines will lose $11.0 billion in 2009. We are ending an Annus Horribilis that brings to a close the 10 challenging years of an aviation (considered the 10 worst financial years in aviation history), said Giovanni Bisignani, IATA’s Director General.

Worst period

He said between 2000 and 2009, airlines lost $49.1 billion, which is an average of $5 billion per year. "The worst is likely behind us. For next year, some key statistics are moving in the right direction. Demand will likely continue to improve and airlines are expected to drive down non-fuel unit costs by 1.3 per cent.

But fuel costs are rising and yields are a continuing disaster. Airlines will remain firmly in the red in 2010 with $5.6 billion in losses," said Bisignani.

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