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IATA: Business travel decline slowing down

Aug 19, 2009

GENEVA - The fall in the number of passengers travelling business and first class -- the most lucrative sectors for airlines -- is showing signs of stabilising, an industry body said on Tuesday.

Figures from the International Air Transport Association (IATA) provided a further indication the economic crisis was bottoming out but offered little respite for airlines battered as traditional business-class passengers slash costs.

"Passenger travel numbers in June are now indicating some stabilisation in air travel demand... Notably the decline moderated in both premium and economy travel in June," IATA said in its monthly Premium Traffic Monitor.

Since March the numbers travelling economy class had shown signs of reaching a floor, but until June that seemed largely due to business travellers switching to cheaper seats rather than any underlying stabilisation of demand, it said.

IATA said total passenger numbers in June were 7.1 percent lower than a year earlier, against a 9.2 percent fall in May.

"Adjusting for seasonal fluctuations passenger numbers were broadly unchanged in June compared with levels in May," it said.

Economy bookings were 5.5 percent lower in June than a year earlier against a 7.6 percent fall in May, while the drop in premium travel slowed to 21.3 percent in June from 23.6 percent in May, it said.

An IATA survey last month showed that many airlines do not expect a proper recovery until early 2011. [ID:nLG33987]

To counter the shift to the back of the plane, many airlines have been aggressively discounting premium seats to keep business-class passengers in the habit.

"The issue now is that this stabilisation of passenger numbers is partly being achieved at the expense of much lower yields, as airlines seek to boost cash flow by making more cheaper seats available," it said.

Revenues from premium travel were declining at a rate close to 40 percent in June, said IATA, which represents 230 carriers.

Top-tier passengers typically make up 7-10 percent of numbers but 25-30 percent of revenues.

Furthermore, the relative improvement was not even across regions, with some key Asian markets seeing a further deterioration as concern about H1N1 swine flu influenza appeared to outweigh improving economic conditions, it said.

Europe's two biggest economies, Germany and France, announced last week that they had exited the recesssion in the second quarter.

But business passengers in Europe who have moved to the back of the plane or on to budget airlines to save money on regional flights may not return, it said.

"There are lags in any cyclical recovery but on this short/medium-haul market this does suggest some further structural decline in premium travel," it said.

IATA: Business travel decline slowing down
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