Demand will drop 2-3% in 2009, says the organisation in its revised outlook.
Domestic carriers, like their global peers, will find it hard to get passengers in 2009 despite all their gimmicks to stimulate demand, said International Air Transport Association (IATA) in its revised outlook for the year.
IATA said air transport demand will drop between 2% and 3% in India even as airlines increase capacity by 0.7%. The organisation sees a 6.8% fall in demand in the Asia-Pacific region and 4% drop in capacity in 2009.
“The prospects for airlines are dependant on economic recovery. There is little to indicate an early end to the downturn. 2009 will be grim,” said Giovanni Bisignani, IATA’s director general and CEO.
IATA’s view of a negative growth was supported by Kapil Kaul, CEO — South Asia, Centre for Asia Pacific Aviation (CAPA), who said demand recovery could be seen only later this year. “We expect under 10% growth in demand in India, most of which will come after the third quarter of 2009, depending on how the market recovers,” he said.
A recovery in the airline industry is expected only with an upturn in the economy. However, according to the latest report by CAPA, the Indian airline industry is still faced with over-capacity, especially in the full-service category where passenger load factors remain below 65%.
India’s market for international air services tripled in size between 2000 and 2008. With falling passenger numbers and increasing cost burden, Indian carriers had either cut or rationalised some of their domestic and international capacities in the last few months. This, however, doesn’t seem to have helped them in improving load factors (average occupancy) and yield (average fare).
Kaul said, “There is still a lot of excess capacity, which should be reduced by 8-10%, especially in the FSS category.”
The outlook for the global air transport industry looks even grimmer. IATA’s revised estimates suggest a $4.7 billion global loss in 2009 as against its December forecast of $2.5 billion loss. As the global economic slowdown hit businesses, it translated into a lower demand for corporate travel. This led to a massive dip in premium travel. Besides, people in the countries facing a recession are having a lower disposable income, which has led to a fall in demand even in the leisure travel segment.
While most regions of the world are expected to see a fall in demand and subsequently, rationalisation in capacity. Middle East will be the only region where demand will grow 1.2% in 2009. As airlines only in this region are adding capacity ahead of the demand creation, their market is growing, IATA says.
Kaul said, “2009-10 is expected to be a pretty uncertain year and recovery is expected only 2010 onwards. Hence, airline losses could eventually be higher than projected.”
No one knows what the impact of the economic meltdown will be, said another industry expert, on condition of anonymity.
According to IATA, only falling fuel prices are helping to curb larger losses. Combined with lower demand, total expenditure on fuel will fall to $116 billion against $168 billion in 2008.
“But the relief of lower fuel prices is overshadowed by falling demand and plummeting revenues,” said Bisignani.
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