Revenue Plunge Brings Airlines ‘Worst Crisis Ever’

GENEVA ~ Airlines need to tackle a “dramatic” plunge in revenues in the industry’s “worst” crisis ever, IATA said on Thursday as international air travel continued to drop in May partly due to swine flu.

Despite signs that the slump in passenger traffic since late last year may be tailing off, the International Air Transport Association (IATA) said there was still significant excess capacity in the airline industry.

“We may have hit bottom but we are a long way from recovery,” IATA Director General Giovanni Bisignani said in a statement.

Passenger traffic fell 9.3 percent last month following a year-on-year decline of 3.1 percent in April, a month traditionally buoyed by holiday travel over the Easter period.

Swine flu probably depressed air travel by about one percent globally in May, the first full month to feel the impact of the pandemic, IATA said.

However, the decline in air passenger traffic slowed in April and May compared to March, indicating “that a floor may now have been reached.”

Nonetheless, average passenger loads per flight continued to decline as the industry failed to cut capacity as quickly as demand slumped, while air freight fell by 17.5 percent in May.

“Capacity is not aligned with demand. Passenger load factors dropped 3.3 percentage points over the last 12 months. The impact on revenue is dramatic,” said Bisignani.

“After a 20 percent fall in international passenger revenue in the first quarter, we estimate that the drop accelerated to as much as minus 30 percent in May. This crisis is the worst we have ever seen.

“Airlines are in survival mode. Cutting costs and conserving cash are the priorities,” the IATA chief added.

Carriers in Mexico, where the swine flu outbreak emerged, experienced a 40 percent drop in demand in May, IATA said.

The association groups some 230 carriers accounting for more than 90 percent of scheduled international air traffic. It does not include exclusively low-cost airlines.

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