IATA report on airline performance should set panic bells ringing in government

Airline body, International Air Transport Association (IATA) announced international scheduled traffic results for January showing a deepening year-on-year demand slump.

International passenger demand fell by 5.6% in January 2009 compared to the same month in 2008, a full percentage point worse than the 4.6% year-on-year drop recorded in December, and the fifth consecutive month of contraction.

Air cargo is a key indicator of economic and manufacturing activity. It had collapsed 22.6% in December 2008, and this has only worsened in January 2009 with a 23.2% drop. Simple translation, manufacturers are still shedding inventory and cutting production.

Clearly alarm bells are ringing, but it does not appear that governments are hearing them.

Giovanni Bisignani, IATA’s Director General and CEO statement says it best

The drop in demand is much more harmful. The industry is shrinking with revenues expected to fall by US$35 billion to US$500 billion, delivering a loss of US$2.5 billion this year.

Airlines remain in intensive care, but while others ask for government bailouts, our demands on Governments are much more modest. First, don’t tax us to death in order to pay for investments in the banking industry. This includes the UK government’s plans to increase its multi-billion pound Air Passenger Duty and the Dutch Government’s misguided departure tax.

In 2008, even as governments delivered tax breaks to stimulate economic growth, the airline industry took on an additional tax burden of US$6.9 billion.

Second, give airlines the commercial freedoms that every other business takes for granted. With the world’s capital markets in disarray, archaic ownership restrictions are an unnecessary burden that must be lifted. Today’s crisis highlights the need to change the structure of this hyper-fragmented and fragile industry

See the detailed results here.

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