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.

Do you agree with Giovanni Bisignani's view ? Post your opinions via a comment.

SCARY!!!!, there is no other word to describe the performance numbers and the forecast from IATA, the association representing 93% of the global commercial air transport industry.

For the month of December, it is now official -- ALL regions of the world, have reported major declines in cargo performance in December 2008 when compared to December 2007. Across the globe, air cargo, a vital barometer of world trade, is down 22.6%.

In November, Africa was the sole region showing positive compared to a year ago. Again, the Asia Pacific region, which represents 45% of global air cargo, led the world with a whopping 26% fall, when compared to December a year ago, this on top of 16.9% decline in November.

As per Giovanni Bisignani, IATA’s Director General and CEO

“The 22.6% free fall in global cargo is unprecedented and shocking. There is no clearer description of the slowdown in world trade. Even in September 2001, when much of the global fleet was grounded [post the 9/11 terror attacks on New York city], the decline was only 13.9%,”

The year on year performance does not reflect the oncoming tsunami of collapsing world commerce and trade. On an annual basis air cargo is down 4% with Latin America leading the world down 13.5%. Asia Pacific is down 6.6%.


Those of us, hoping for a global recovery in 2009, data from the Economist Intelligence Unit (EIU) and IATA, shatter those hopes. Business and consumer confidence are at historic lows. Leaders at the World Economic Forum meeting at Davos are talking about a mind numbing 0.5% growth for 2009. While India and China will experience moderate growth of around 6%, the recession in the developed economies will ensure the global recovery will commence only in 2010.



Semiconductors shipments are one the highest users of air cargo and a key barometer in global electronics production. The shipment performance of the global semiconductor industry reflects the deepening impact of the global recession.


Across the globe, the aviation market have been hit, and hit hard. Revenue Passenger Kilometers (RPKs) are down, and Freight Tonne Kilometers (FTKs) are way down.


Airlines have been retiring or parking their aircraft in record numbers. The silver lining in this saga, is that airlines, mostly in the middle east, have been taking deliveries of new more fuel-efficient aircraft, and refreshing their fleet to cut down operating costs.


Airlines across the world are facing deepening losses, and I am sure we are going to see the many airlines and brands simply disappear during 2009. US airlines were smart and cut their capacity ahead of the drop in demand, unlike airlines in other regions. This will aid them in returning to profitability sooner.


The bad news is going to continue in 2009. Passenger markets are expect to decline another 3%, which freight will decline another 5%.


Part of this precipitous drop in global trade is due to the "FUD Factor". Fear Uncertainty and Doubt. Every procurement manager, and individual consumer has retreated in to a shell. Stop all purchases. Buy only the bare minimum. This has slammed the brakes on the global economy so hard, that there is hurt everywhere.

Life is going to be difficult, but the world is still here. Caution is needed, but so is pragmatism. Surely there is no need to retreat so hard, and withdraw so deep.

As the world emerges from this shell, and consumption re-starts, the shelves are going to be bare, as existing inventories would have been fully consumed, and capacity cuts in manufacturing will be take supply well below demand. At that point air cargo will increase with a vengeance.

British Airways today, reported its performance for December 2008. The airline's performance is in line with IATA's November 2008 report, which highlights a deepening of the global economic slowdown.

Capacity declines are in line with actual performance. Compared to December 2007, passenger capacity, measured in Available Seat Kilometres (ASK), was down 3 percent, Actual passenger performance, measured in Revenue Passenger Kilometres (RPK), fell by 3.4 per cent, passenger load factor decreased by 0.2 per cent to 76.7 per cent.

It also appears that corporate passengers are belt tightening, and moving to the back of the plane. Premium passenger traffic (first and business class) decreased by 12.1 per cent while economy decreased by a comparatively modest 1.7 per cent.

The alarming fall, which highlights economic slowdown, is in cargo performance, measured in Freight Tonne Kilometres (FTK), fell by 14.3 per cent.

Globally air cargo transports about 35 per cent to 40 per cent of global trade, by value. Globally, air cargo FTK fell by 13.5 per cent in November 2008, when compared to a year ago. The December fall by British Airways, highlight the continuing and rapid decline of global trade, and deepening of the already significant economic slowdown.

2009 will see economies become a lot worse before improving.

The recently announced results by The International Air Transport Association (IATA), is nothing short of shocking.

International air cargo is down by a whopping 13.5 per cent in November when compared to November 2007, and passenger growth is down by 4.6 per cent.

Graph legend
RPK - Revenue Passenger Kilometres (sales)
ASK - Available Seat Kilometres (capacity)
FTK - Freight Ton Kilometres (sales)
ATK - Available Ton Kilometres (capacity)


Even for year to date comparisons January to November between 2008 and 2007, global air cargo is down 2.2 per cent


Globally air cargo transports about 35 per cent to 40 per cent of global trade, by value. The negative growth in air cargo clearly shows the rapid fall in global trade, and the broadening impact of the deepening economic slowdown.

Even the middle east, the region showing consistent growth, slipped in to negative territory at -1.6 per cent. The largest air freight zone, Asia Pacific, which contributes 44.6 per cent to global air freight, contracted by the largest -16.90 per cent. Capacity cuts of 1 per cent in passenger and 3.7 per cent in cargo, could not keep up with the rapid declines.

India
As per data from the Airports Authority of India, available till October 2008; India year-to-date passenger performance is significantly worse than the rest of Asia Pacific and global performance. Passenger growth is down to -3.4 per cent vs. -0.8 per cent (Asia Pacific) and +2.2 per cent global.

However on the freight front, India has a Y-T-D growth of 4.2 per cent based on actual tonnage, compared to -4.7 per cent in Asia Pacific and -2.2 per cent globally.


Bangalore
For some unexplainable reason, Bangalore's performance is way below the national standard, at -14.8 per cent and -5.3 per cent for monthly passenger and freight performance, and -8 per cent and -7 per cent for year to date passenger and freight performance.

Highlights of the IATA report :

International Passenger Traffic

• The November passenger decline of 4.6% is a considerable worsening from both the 1.3% demand contraction in October and the 2.9% fall in September.
• Asia-Pacific carriers face the most difficult operating environment with a 9.7% decline in November, following a 6.1% contraction in October. The region also had the most aggressive capacity cuts at -5.1%. While Chinese domestic traffic rebounded after the Olympics, travel to and from international markets continues to decline, reflecting the weakness in both global trade and consumer confidence.
• North American carriers saw international traffic decline by 4.8% - the second largest drop among the regions. Until August, the region’s carriers had been shifting capacity to international markets. With the near collapse of the investment banking sector and consequent reductions in business travel, North Atlantic travel slumped. Carriers have started to cut international capacity with a 0.8% drop in November (following 0.4% growth in October)
• European carriers saw international traffic drop by 3.4% as all the region’s major markets (intra-Europe, North Atlantic, and Asia) slumped.
• Smaller emerging markets fared better. African carriers saw traffic decline by 1.6%. This is a considerable improvement from the 12.9% drop in October, resulting from stronger intra-African traffic. Middle Eastern carriers saw traffic increase by 5.6%. This is up from 3.5% growth in October, but represents a step-change from the double-digit expansion that characterized growth prior to the current financial crisis. Latin American carriers saw a slight decline in growth to 3.3% (compared to 4.5% growth in October), buoyed by the region’s positive, albeit slower, economic growth.

International Freight Traffic

• Asia-Pacific carriers (representing 44.6% of global freight) saw freight traffic fall by 16.9% in November - the largest decline of any region. As freight accounts for a larger percentage of revenues for the Asia-Pacific carriers, fourth quarter profits for the region’s carriers will be disproportionately (and negatively) impacted by the downturn in the global air freight market.
• Double-digit freight declines were also experienced by Latin American carriers (-15.7%), North American carriers (-14.4%) and European carriers (-11.0%). Freight traffic for Middle Eastern carriers turned negative (-1.6%), following 1.0% growth in October. African carriers, while being the only region posting freight growth (2.2%), saw a decline from the 3.0% growth posted in October. Plummeting business confidence and the continuing turmoil in financial markets indicates that the worsening trend will be continued in December.

Giovanni Bisignani, IATA’s Director General and CEO said

“The industry is now shrinking by all measures. The 1.0% capacity cut in international passenger markets in November could not keep pace with the 4.6% fall in passenger demand. We can expect deep losses in the fourth quarter,”

“With no end in sight for the worsening global economy, the 2008 gloom will carry over into the new year. Relief in the oil price has been outstripped by the falls in demand and capacity cuts are not keeping pace. The industry is back in intensive care. Improving efficiency everywhere will be theme for 2009,”

While the end to the global economic slowdown is still much further away than expected, the freight performance in India, shows us, the Indian economy is still performing well. We have to defeat the FUD Factor (Fear Uncertainty Doubt) that is in our minds.

According to a PTI report, the International Air Transport Association (IATA) is working on a non-binding document for its member airlines calling for foreign ownership, saying that the aviation industry should be allowed to run like any other business like automobiles or telecom. IATA is planning to urge all governments to have a re-look at allowing foreign airlines to pick up a stake in domestic airlines.

“We are not talking only about India, but along with other countries we will certainly recommend that foreign airlines be allowed to pick up a stake in domestic airlines. We are supporting the relaxation of overseas investment as this could help airlines to stay afloat or re-structure their business more efficiently,” said Brian Pearce, Chief Economist, IATA.

Elaborating further, Carlos Grau Tanner, Director (Government and Industry affairs), IATA said that he is working on the non-binding document which is likely to be tabled at an international conference early next year. Tanner further added that cross-border ownership was prevalent in other industries like telecom and automobile, and they do not face any kind of FDI related restrictions that the aviation sector faces.

The International Air Transport Association (IATA) painted a grim forecast for the airline industry as it announced its forecast for 2009 showing an industry loss of US$2.5 billion. All regions, except the US, are expected to report larger losses in 2009 than in 2008.

Forecast highlights are:

• Industry revenues are expected to decline to US$501 billion. This a fall of US$35 billion from the US$536 billion in revenues forecasted for 2008. This drop in revenues is the first since the two consecutive years of decline in 2001 and 2002.
• Yields will decline by 3.0% (5.3% when adjusted for exchange rates and inflation).
• Passenger traffic is expected to decline by 3% following growth of 2% in 2008. This is the first decline in passenger traffic since the 2.7% drop in 2001.
• Cargo traffic is expected to decline by 5%, following a drop of 1.5% in 2008. Prior to 2008 the last time that cargo declined was in 2001 when a 6% drop was recorded.
• The 2009 oil price is expected to average US$60 per barrel (Brent) for a total bill of US$142 billion. This is US$32 billion lower than in 2008 when oil averaged US$100 per barrel (Brent).

Giovanni Bisignani, IATA’s Director General and CEO says

“The outlook is bleak. The chronic industry crisis will continue into 2009 with US$2.5 billion in losses. We face the worst revenue environment in 50 years,”

IATA also updated its forecast for 2008 to a loss of US$5.0 billion. This is slightly improved from the US$5.2 billion loss projected in the Association’s September forecast primarily as a result of the rapid decline in fuel prices.

The reduction in industry losses from 2008 to 2009 is primarily due to a shift in the results of North American carriers. Carriers in this region were hardest hit by high fuel prices with very limited hedging and are expected to post the largest industry losses for 2008 at US$3.9 billion.

An early pre-emptive action by a 10% domestic capacity reduction in response to the fuel crisis has given the region’s carriers a head-start in combating the recession-led fall in demand. The lack of hedging is now allowing the region’s carriers to take full advantage of rapidly declining spot fuel prices. As a result, North American carriers are expected to post a small profit of US$300 million in 2009, which represents a profit margin of less than 1%.

All other regions will show losses:

• Asia-Pacific carriers will see losses more than double from the US$500 million in 2008 to US$1.1 billion in 2009. With 45% of the global cargo market, the region’s carriers will be disproportionately impacted by the expected 5% drop in global cargo markets next year. The region’s largest market - Japan - is already in recession. And its two main growth markets - China and India - are expected to deliver a major shift in performance. Chinese growth will slow as a result of the drop-off in exports. India’s carriers, which are already struggling with high taxes and insufficient infrastructure, can expect a drop in demand following on from the tragic terror incidents in November. Indian carriers which represent just 2% of the global market are expected to contribute almost $2 billion of the $5 billion losses forecast for this year.
  
• Losses for European carriers will increase ten-fold to US$1 billion. Europe’s main economies are already in recession. Hedging has locked in high fuel prices for many of the region’s carriers in US dollar terms, and the weakened Euro is exaggerating the impact.
• Middle Eastern airlines will see losses double to US$200 million. The challenge for the region will be to match capacity to demand as fleets expand and traffic slows - particularly for long-haul connections.
• Latin American carriers will see losses double to US$200 million. Strong commodity demand that has driven the region’s growth has been severely curtailed in the current economic crisis. The downturn in the US economy is hitting the region hard.
• African airlines will see losses of US$300 million continue. The region’s carriers face strong competition. Defending market-share will be the main challenge.

Bisignani made special note of the continuing contraction of air cargo traffic that started in June 2008, saying

“Air cargo comprises 35% of value of goods traded internationally. The 7.9% decline in October is a clear indication that the worst is yet to come - for airlines and the slowing global economy,”

“Airlines have done a remarkable job of restructuring themselves since 2001. Non-fuel unit costs are down 13%. Fuel efficiency has improved by 19%. And sales and marketing unit costs have come down by 13%. IATA made a significant contribution to this restructuring. In 2008 our fuel campaign helped airlines to save US$5 billion, equal to 14.8 million tonnes of CO2. And our work with monopoly suppliers yielded saving of US$2.8 billion. But the ferocity of the economic crisis has overshadowed these gains and airlines are struggling to match capacity with the expected 3% drop in passenger demand for 2009. The industry remains sick. And it will take changes beyond the control of airlines to navigate back into profitable territory.”

Bisignani outlined an industry action plan for 2009 saying

“Labour must understand that jobs will disappear when costs don’t come down. Industry partners must contribute to efficiency gains. And governments must stop crazy taxation, fix the infrastructure, give airlines normal commercial freedoms and effectively regulate monopoly suppliers.”

The United Kingdom Treasury Monday said it plans to increase air passenger duty rates by length of haul and class of service on Nov. 1, 2009, instead of its previous per-plane tax proposal.

The United Kingdom said it is moving from two to four "distance bands" in efforts to "improve environmental signals." The new air passenger duties, set to take effect in November 2009, would range from £11 (US$16.68) per way for economy travel of 2,000 miles or less to £110 for traveling more than 6,000 miles in the front of the plane.

The Treasury is calling for another increase to those rates in November 2010 of up to £170 for the longest haul in premium classes. The UK Treasury in its Pre-Budget Report, issued this week, said there is a "need to ensure greater stability in tax policy at a time of economic uncertainty, while maintaining its environmental objectives. The government has therefore decided to reform the air passenger duty regime rather than proceed with a per-plane tax."

Aviation organizations are railing against the rate changes, calling them illegal fees masquerading as environmental protections. The International Air Transport Association (IATA) director general Giovanni Bisignani today called the air passenger duty a "cash grab," adding that it would add millions of pounds to the cost of travel from the United Kingdom and none of the additional revenue through is earmarked for environmental initiatives.

The U.S. Air Transport Association (ATA) also said it opposes the changes, claiming the move is "counterproductive to the airlines' environmental progress and is in conflict with established law." "Though the U.K. government asserts that it moderated the amount of the air passenger duty increase in light of the world economic crisis, the increases still are substantial," ATA said in a statement issued Monday. "For example, for a one-way flight to the U.K. from the United States, the per-passenger duty in economy class will increase from £40 per passenger today to £60 by 2010." ATA CEO James May said the U.K. government should expect legal challenges to the rate change, calling it a "revenue raiser for the government under the guise of environmental protection." ATA said the duty violates several international aviation provisions as laid out by the Convention on International Civil Aviation as well as bilateral air agreements.

According to the Centre for Asia Pacific Aviation, the International Air Transport Association (IATA) has announced global international traffic results for September, with passenger traffic declining 2.9%, compared to the same month in 2007.

International load factors tumbled by 4.4% percentage points from August to 74.8% in September.

Giovanni Bisignani, IATA’s Director General and CEO said, “The deterioration in traffic is alarmingly fast-paced and widespread. We have not seen such a decline in passenger traffic since SARS in 2003. Even the good news that the oil price has fallen to half its July peak is not enough to offset the impact of the drop in demand. At this rate, losses may be even deeper than our forecast USD5.2-billion for this year.”

This is the first time since the SARS crisis in 2003 that global passenger traffic has shrunk. Capacity cuts were not able to keep pace with the fall in demand. September load factors in all regions fell compared to August.

For September, all major regions reported that passenger traffic shrank, with the exception of Latin American carriers which saw an increase of 1.7%.

Even this is down from the 11.9% growth of the previous month.

African carriers posted the largest decline in traffic (-7.8%), a continuation of the previous month’s trend.

This drop in overall international air traffic does not bode well for Bengaluru International Airport (BIA) and its promoter BIAL. The domestic air traffic has reduced drastically, with short-haul traffic all but disappearing. Only a spectacular growth in international flights has enabled BIA a modest 1.5% gain in overall passenger traffic. The recent announcement by the world's largest airline, Air France-KLM, of withdrawal of the Hyderabad Amsterdam route due to poor performance, highlights the problem.

It is imperative for the BIAL consortium to put its thinking cap on and try to raise the domestic traffic, lest the international airlines pull the rug from under its feet.

Krupa Vora of TravelBizMonitor reports, of a significant development, which has national implications. Travel agents will continue to receive commissions on the sale of airline tickets till the Calcutta High Court passes judgement in the suit filed by a TAFI member agent in Kolkata.

The TAFI member agent (plaintiff) filed a suit in Calcutta High Court early last week against National Aviation Company of India Limited (NACIL), International Air Transport Association (IATA) against the abolition of agency commission on the grounds that the IATA Passenger Agency Sales Agreement does not permit an airline to reduce agency commission to zero per cent.

The zero commission regime was to due to be implemented from November 1, 2008.

The High Court, according to industry sources, in its first hearing of the suit (case number: G.A. 3257/2008 and C.S. 197/2008) had passed an order to maintain status quo stating, “Having heard and considered the facts and circumstances of the case, the reduction of remuneration to zero per cent cannot be justified as the term 'Service rendered' postulates payment for work done. Zero per cent contemplates services rendered for free and the rules of IATA do not postulate such a situation. Neither the rules have been amended nor has the agreement been terminated. Therefore, there is no justification for reduction of the commission to zero per cent. Parties are directed to maintain status quo as on date till 30th September 2008.”

At the hearing of the suit yesterday, where according to sources, the airline representatives did not show up, the High Court directed the parties to maintain a status quo till the next hearing.

The date for the next hearing, according to sources is November 5, 2008.

As the plaintiff in his petition had also advised the court that this was a matter affecting numerous IATA agents across the country, the Hon'ble Court, according to sources has, therefore, given leave to all agents interested in the matter to become a party to the suit by making an application to the Court. A newspaper advertisement to this effect will be published shortly in two major dailies. According to sources, in order to become party to the suit an agent will be required to submit an affidavit, stating the same, along with a copy of his/her Agreement signed with IATA.

The Centre for Asia Pacific Aviation reports that the International Air Transport Association (IATA) released international traffic data for Aug-08 that confirmed a continuing downturn.

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.

Giovanni Bisignani, IATA’s Director General and CEO said, “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.” “The slowdown has been so sudden that airlines can’t 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.”

Bisignani said, 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.”

Passenger

• 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 region’s 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.

Cargo

• 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.

Bisignani added,“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. It’s a matter of survival.”

Despite this slowdown, foreign carriers are still bullish on India, and Bangalore in particular. Emirates in is the process of adding its 3rd daily flight, and is today the dominant foreign airline in Bangalore.