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Airline Industry

European airlines: Air traffic stabilizing

Aug 11, 2009

LONDON - European airlines and the U.K.'s dominant airport operator Monday signaled that passenger traffic is stabilizing after two years of steep falls, but trans-Atlantic traffic, the profit driver for British Airways PLC, remains in the doldrums and analysts warned that the industry isn't set for a recovery yet.

The Association of European Airlines, which represents 33 scheduled European network carriers, said preliminary figures showed traffic declines eased in July, one of the peak months for air travel in Europe due to the start of the summer holidays. The association said July traffic, measured in revenue passenger kilometers, was down 2.2% on the year, compared with a 6.5% fall in June and an 8.3% decline in May.

U.K. airports group BAA - which owns London airports Heathrow, Gatwick and Stansted as well as Southampton in Southern England and Glasgow, Edinburgh and Aberdeen in Scotland - said its airports handled 14.5 million passengers in July, down 2.4% on July 2008, following declines of 5.9% in June and 7.3% in May.

Heathrow airport, the U.K.'s largest airport and BA's main base, returned to growth, handling 6.5 million passengers, up 0.9% on July 2008. BAA, a unit of Spain's Grupo Ferrovial SA, said it was the airport's busiest July since 2006.

However, industry analysts warned that the figures may not signal a recovery for the airline industry. They said that the stabilization may signal that many consumers aren't prepared to sacrifice summer vacations, but with unemployment rising and taxes set to rise, demand for air travel is set to remain weak.

Airports Council International, a trade body for airports around the world, said Monday it is keeping its forecast for an 8% fall in passenger numbers and a 16% decline in freight at European airports during the whole of 2009. It said passenger numbers at European airports were down 10% in the first half of the year.

"More than 85% of European airports are suffering falls in traffic so far this year. Traffic recovery is not yet in sight, although we may have hit the bottom," ACI Europe Director General Olivier Jankovec said.

Airlines across the world have reported mounting losses or slashed profits as the credit crunch and the economic downturn cut demand for air travel and air cargo. In recent weeks, several have said there are signs of stabilization in air passenger traffic, although the downturn in the industry is expected to continue through next year, at least.

In response, airlines have cut routes and grounded planes, and have also tried to cut costs elsewhere by laying off staff or cutting back on services offered on flights.

The AEA said capacity reductions by its members slowed to 3% in July, and these had been sufficient to counteract the decline in passenger volumes, meaning that planes were fuller.

BA has been one of the worst-hit major airlines because it is heavily dependent on premium traffic across the Atlantic out of its Heathrow base. Last month, it reported its first ever fiscal first-quarter pretax loss as a private airline, as it warned that those still flying were spending less.

Last week, BA reported that passenger traffic, measured in revenue passenger kilometers, edged up 1% year-on-year in July as it cut capacity, although the number of passengers it carried fell 1.2% on the year to 3.21 million. Its premium traffic, mostly business passengers paying more for their tickets, was down 11% on the year.

BAA said European and long-haul traffic, excluding the Atlantic routes, grew at its airports in July, but U.K. domestic traffic and charter traffic continued to fall, and trans-Atlantic traffic was down 8% on the year. In a glimmer of hope for BA, trans-Atlantic traffic at Heathrow was down only 2.1%.

BAA said cargo traffic also showed a slower rate of decline in July, but was still down 11.7% on the year. Cargo traffic at its airports is down 17% so far in 2009 compared with a year earlier.

BAA is being forced to sell three of its airports - Gatwick, Stansted and either Edinburgh or Gatwick - because the U.K. anti-trust regulator ruled its was too dominant on U.K. air traffic. It has appealed the decision, meaning a sale of any airport is unlikely before next year.

Irish airline Aer Lingus Group PLC Monday said it carried 1.12 million passengers in July, up 8.2% on the year as an 11.2% increase in numbers on its short-haul routes to one million more than offset a 12.4% decline in long-haul passengers.

Last week, its biggest rival Ryanair Holdings PLC reported a 19% jump in passenger numbers in July to 6.7 million passengers. Ryanair, Europe's biggest low-cost carrier, has been growing strongly in recent years as it has added new routes. It has made three takeover attempts on Aer Lingus, but has so far failed to acquire its rival because major shareholders like the Irish government and pilots unions refuse to sell their Aer Lingus stakes to Ryanair.

European airlines: Air traffic stabilizing
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Source: Dow Jones Newswires

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