Aviation Industry may be bottoming out

Wednesday September 9, 2009
Industry recession may be bottoming out, say aviation players


HONG KONG/BRUSSELS: Airlines and their suppliers are reporting tentative signs that a severe industry recession is bottoming out. Airbus, the world’s largest producer of passenger jets, said airline traffic had possibly seen “the trough of the recession” and could start to rebound from next year. “In 2009, we believe total traffic is down 2%. In 2010 we may experience a 4.6% growth rate,” Laurent Rouaud, senior vice president of market and product strategy, said at the Asian Aerospace exhibition in Hong Kong.

In Europe, Air France-KLM said passenger traffic fell 2.9% in August but its planes were on average 84.8% full, a rise of 1.1 percentage points from the same holiday peak month a year ago. The figures came as industry data for July showed airline passenger and freight traffic dropped much less sharply year-on-year than in the first half of 2009. Industry body ACI Europe said after a survey of 106 airports, passenger traffic at European airports fell 4.3% compared with July 2008, versus an average 9.6% drop during the preceding six months of this year.

Freight traffic – a widely watched indicator of economic health – fell 13.4% compared with July 2008, an improvement on the average 22.4% decrease during the preceding six months.
“That would fit with our picture,” said economist Cristoph Weil at Commerzbank.
“We believe we will see a strong recovery in Q3 and Q4 in the euro area.”
Air France-KLM said its cargo business had in August confirmed signs of stabilisation seen in recent months.

Ireland’s Aer Lingus said on Monday passenger numbers had risen 7.7% year-on-year in August. Economists say the global economy looks to be pulling out of recession, with the OECD predicting a renewal of growth for the United States and euro zone in the third quarter.

But, like the airline industry, the broader economy remains on life support and G20 finance ministers agreed on Sept 5 to keep stimulus measures in place. ACI Europe’s numbers were helped slightly by weak comparative figures in July 2008, when the economic downturn first started to bite and passenger data entered negative territory for the first time in six years.

But weak comparatives account for only about a fifth of the improvement in freight volumes, ACI archive figures show. Still, Airbus and Boeing are headed for their worst annual order tally in at least 15 years as struggling airlines cancel or defer almost as many planes as they buy.
The world’s airlines are expected to post total 2009 losses of US$9bil, with first-half net losses reaching at least US$6bil, according to the International Air Transport Association.
Air France-KLM last week announced 1,500 voluntary redundancies, adding to thousands of airline job cuts worldwide.

Rouaud however said Airbus was on track to deliver 480 aircraft in 2009 and aircraft financing has been “so far, so good.” Deliveries lag orders by several years but airlines only have to pay for aircraft when they are delivered. The EADS subsidiary is projecting 2009 plane deliveries at least as high as last year’s record 483 aircraft, but has said it will extend recent production cuts if conditions worsen.

Even if airlines start to fly out of recession, they will be haunted by big questions on costs, especially fuel, Rouaud said. At US$67.90 a barrel, benchmark North Sea Brent crude futures prices have risen 38% since the end of March. — Reuters

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