IATA warns of Swine flu impact

Swine flu could have a significant impact on air traffic, warned IATA as it reported load factors for airlines last month on average fell 5.4% year-on-year as passenger demand continued to fall.

“It’s still too early to judge what impact swine flu will have on the bottom line,” said IATA director general Giovanni Bisignani. “But it’s sure that anything that shakes the confidence of passengers has a negative impact on the business. And the timing could not be worse, given all of the other economic problems airlines are facing.”

Middle Eastern carriers were the only airlines to see passenger demand grow in March, but the 4.7% rise over the month was far lower than the rise in capacity of 13.1%.

The association said that this is an improvement from the 0.4% growth in February, and represented an expansion of market share. But this was out of balance with the 13.1% increase in capacity.

The global economic crisis continues to reduce demand for international air travel: Bisignani

IATA has already warned that Middle Eastern airlines will lose $900 million because of overcapacity. Demand growth for air travel is expected to reach 1.2%, but this is overshadowed by a projected 3.8% capacity increase.

“Airlines cannot adjust capacity to match demand,” said Bisignani. “Load factors have dipped sharply from last year. All of this is hitting revenues hard.”

Freight demand in March was relatively stable, down 21.4% from the same month a year ago. “The only glimmer of hope is that cargo demand has stabilised this month, although at the shockingly low level,” Bisignani added.

The severity of the slump in air freight was at least partly driven by manufacturers seeking to correct large inventory overhangs that emerged in late 2008, IATA said, which represents some 230 airlines comprising 93% of scheduled international air traffic.

Stabilisation of the inventory-to-sales ratio had in turn stabilised air freight demand. But recovery depended on purchasing that can deplete the inventory overhang, it added.