Airlines See Big Traffic Drop and Expect More Bad News

As far as commercial aviation goes, the recession is already starting to bite.

The
International Air Transport Association(IATA), the body that represents most of the world's airlines, says that traffic declined 2.9 percent year over year in September, and doesn't see the situation getting better anytime soon. "It's the first monthly drop we've had since the 2003 SARS crisis," Steve Lott of the IATA told Wired.com. "And it's happening across all markets simultaneously. That's concerning to us."

IATA says that
revenue passenger kilometers(RPKs), a standard metric used to measure airline traffic, dropped in every region around the world excluding Latin America. Load factor, the percentage of seats filled, dropped 4.4 percent. Lott says that although airlines dramatically cut capacity this year to cope with oil prices, the strategy doesn't seem to be filling planes as hoped. "In the US especially, airlines were extremely aggressive in cutting capacity," he says. But it seems like this has been insufficient."

"The deterioration in traffic is alarmingly fast paced and and
widespread," said IATA's CEO Giovanni Bisignani after the September
numbers were released. "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."

There are several elements of the current slowdown that have the IATA really freaked out. One is the timing of the numbers. They show that demand
began weakening a full month before the brunt of the credit and stock
market fiascos, and IATA anticipates that traffic will tumble further
as the full impact of these events is felt.

Lott says a 7.7 percent decrease in year over year cargo traffic
is also a big worry. "Cargo is seen as a bit of a leading indicator,
especially in Asia," he says. "Weakness in cargo doesn't bode well for
the larger economy."

He adds that IATA currently is projecting a 2009 industry loss of
$4.1 billion, but that it will revise that number in December based on
market conditions.

Interestingly, US airlines
seem more optimisticabout their prospects, at least in the short term. Delta, AirTrain and
others are reporting strong holiday bookings, and expect fuller
flights thanks to capacity cuts earlier this year.

But Lott doesn't see all that much to be cheerful about. "The next
few months are going to be tough," he says. "We're in for a rough
ride."

Photo by Flickr user
stephenhanafin