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Airline Industry

IATA: Airline industry is starting to turn around

Oct 15, 2009

After a slump lasting more than a year, the airline industry is starting to turn around, with revenue, passenger numbers and premium seat sales recovering, the latest figures from the International Air Transport Association show.

But the recovery is weak. And although premium cabins - which account for 40 per cent of revenue for some carriers - are filling up, many of the people occupying these seats are non-paying passengers enjoying loyalty upgrades. Meanwhile, more business travellers are going coach-class, especially on regional routes.

'The direction is now up, though the pace of improvement is weaker than for passenger numbers because average fares have only just begun to increase,' Iata said.

Still, overall passenger load factors are back to pre-recession levels, though this applies more to economy than premium seats, it added.

The number of international passengers in August was 1.5 per cent lower year on year, a marked improvement on the 9.7 per cent decline during the February low period.

More than 90 per cent of passengers travelled economy class in August, when this segment was down 0.4 per cent year on year, versus February's 8.4 per cent drop.

'There has been some shift of business travellers to cheaper seats at the back of aircraft which has moderated the decline in economy numbers, but the impact of this is small,' Iata said, adding that the turnaround in economy travel had been driven by consumer confidence in major economies, which has been rising since hitting a low in February.

There was an 'improvement' in premium seat sales in August. The number of paying passenger in this segment was 12 per cent lower year on year - much better than the 23.5 per cent drop recorded in May.

'World trade has picked up since June but not sufficiently to warrant a significant rise in premium travel,' Iata said.

Passengers travelling in front cabins represent less than 10 per cent of the total number but contribute between 30-40 per cent of individual airlines' revenue. A recovery in this segment is considered critical for premium carriers like Singapore Airlines, Cathay Pacific and British Airways.

Addressing the observation that many airlines have recently reported filling up their premium seats, Iata said pointedly: 'Since the data reported here measures numbers sitting in seat classes rather than purchasing tickets, some of the rise in premium travel could be upgrades, with little benefit to yields.'

Total revenue for carriers from premium seat sales was still down an estimated 30 per cent year on year in August. And average premium fares were down 18 per cent, though this was much better than the low in April when they were down almost 27 down.

Travel within the Far East registered the biggest improvement in August, with premium travel in the region falling 10.4 per cent year on year, versus a 19.5 per cent decline in July.

Economy travel improved strongly, with passenger numbers up 4.4 per cent year on year in August.

'While economies and travel are improving within the Asia-Pacific region, it is not benefiting long-haul markets connected with the region to the same extent,' Iata said.

'In fact, passenger numbers across the north and mid-Pacific remained down 8.2 per cent overall in both July and August as an improvement in premium travel was offset by a deterioration in economy.'

Traveller numbers between Europe and Asia fell 2.7 per cent in August, compared with a 5.4 per cent fall the previous month.

IATA: Airline industry is starting to turn around
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