Friday, March 27, 2009

International Air Travel Slump Worsens

When does this bottom out?

Amid reports that international air travel plummeted 10.1 percent in February, Air France-KLM announced today that it expected a $268 million loss for this year, six weeks after it had predicted a profit for the fiscal year -- which ends Tuesday.

That sudden reversal of fortune shows just how tough the international business-travel travel market has become for airlines that depend mightily on it. Reuters today quotes aviation analyst Stephen Furlong: "The downturn is global and the downturn is most exposed to falls in cargo and premium traffic."

The falloff in premium traffic, business-class and first-class tickets, has been staggering to airlines who only a year ago thought the revenue growth in the front of the planes would never end.

Yesterday, the International Air Transport Association said that world airline data for February show a "continuing deterioration in demand."

Passenger traffic fell 10.1 percent overall. So far, airlines have not been able to reduce capacity quickly enough to adjust to the plunge in demand. Revenues, reflecting cheaper fares occasioned by the decline in demand, are off sharply across the board. The IATA is predicting that world airline revenues will fall 12 percent this year, and that may well be an optimistic number.

And, as I keep saying, the system is shrinking, shrinking.

"The priority for airlines around the world is survival -- conserving cash and adjusting capacity to meet demand," said Giovanni Bisignani, the CEO of the airline trade group.


No comments: