As expected it was wall-to-wall flu coverage yesterday which is continuing today and expected to go on for the foreseeable future. I love collecting headlines that really are not news and most yesterday were just that – travel to be hurt by flu reports – was the gist of most headlines. Duh.

Still, news organizations cranked out stories about which stocks to avoid, how airlines and airports are preparing and the actions they are taking. The was even the odd plea for folks not to panic – that coming from Rick Seaney, who, of course, is right. Joe Sharkey even tried to track down who suggested a U.S. travel ban. (For links to the most interesting or important stories see below)

Still we all remember the dive in traffic with SARS (severe acute respiratory syndrome) which lasted about one quarter in the Spring of 2003. The Asian Development Bank estimated the impact to GDP for East and Southeast Asia at $18 billion or 0.6 percentage points that year. It primarily impacted travel arrivals which, the bank said, dropped 15-70 percent for tourism alone that spring in the illness hot spots while other areas experienced declines of 15 to 35% for an estimated loss of $15 billion in tourism revenues. Today, tourism is a much bigger contributor to growth, magnifying the impact of illness-related scares.

In noting the “brief but substantial declines in passenger traffic” damaged Asian carriers, S&P Managing Director Phil Baggaley stated, "though swine flu has not yet caused health problems on a similar scale, we believe airlines are at risk of suffering reduced traffic because of government-imposed quarantines and travelers' fears."

Perhaps hoping to get more traction on its monthly traffic statistics or just too besieged by reporters calls for a comment, the International Air Transport Association released a statement this morning saying that it is too early to tell what the ultimate impact will be on the bottom line. Still, it offered some interesting perspectives on what airlines are facing worldwide.

“It's sure that anything that shakes the confidence of passengers has a negative impact on the business,” said IATA Director General Giovanni Bisignani, who noted only a small number of cancellations to date. “And the timing could not be worse, given all of the other economic problems airlines are facing,"

Aside from Swine Flu, Bisignani noted that airlines face many challenges. “Like the rest of the economy, recovery in the air transport sector rests on a rise in consumer confidence and consumer spending,” he said. “Shedding debt will be a major headwind. US households, for example, are leveraged at 130% of annual income. Even bringing this down by 5% erases US$500 billion in consumer spending. The challenge for governments is to turn stimulus funds into spending that fuels trade.”

Noting the deteriorating financial situation of many airlines, Bisignani urged governments to move forward with liberalization - particularly of the “archaic ownership restrictions that prevent cross-border access to capital and consolidation.”

“Air transport is an economic catalyst and can play an important role in driving recovery, but only if we are financially sound,” he said. “Access to global capital and the freedom to consolidate would go a long way to shoring up this industry - without government bailouts. Unfortunately, instead of using airlines to drive growth, many governments see us as a cash cow.” IATA estimates that international revenues in March will be impacted with a decline of up to 20%.

“It is shockingly disappointing that the UK Chancellor is continuing with plans to raise the UK Air Passenger Duty in the middle of this economic crisis,” he continued. “When the government should be doing everything possible to stimulate the economy, it makes no sense to dampen demand for air travel with increased taxation. Look no further than the Netherlands where collecting an extra EUR 312 million in extra revenues with a new departure tax cost the economy up to EUR 1.2 billion in lost revenue. The Dutch had the good sense to abolish the tax. Let’s hope that others will follow.”

March data for scheduled international traffic showed demand fell to 11.1% below March 2008 levels. Airlines cut international passenger capacity by 4.4% resulting in an average load factor of 72.1%. This is 5.4 percentage points below the average load factor recorded in March 2008. Freight demand was relatively stable at -21.4% compared to March 2008.

• Carriers in Asia Pacific continued to lead the decline with a 14.5% fall in passenger demand, outstripping a 9.3% downward adjustment in capacity. The region is particularly impacted by the fall-off in long-haul travel, which is contracting faster than short-haul.

• North American carriers saw a decline in international passenger demand of 13.4% as travel was further discouraged by US unemployment reaching 8.5% in March and consumer confidence remaining weak.

• European carriers saw their international demand fall by 11.6% where confidence has been dented by unemployment in key markets such as Germany and Spain increased to 8.6% and 17.4% respectively.

• African carriers showed the weakest performance in March with a 15.6% fall in demand. But they did the best job at matching capacity to demand with an aggressive cut of 15.1%. While cross border travel within Africa grew during February, African carriers continued to lose market share.

• Latin American carriers increased capacity by 2.2% as demand fell by 5.9%. Travel to and from Central America and from Latin America to North America was particularly weak.

• Middle Eastern carriers were the only ones to experience growth in March (4.7%). 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,” said. “Airlines cannot adjust capacity to match demand. Load factors have dipped sharply from last year. All of this is hitting revenues hard,” said Bisignani. “The only glimmer of hope is that cargo demand has stabilized this month although at the shockingly low level of -21.4%.” said Bisignani. “It’s not the end of the recession, but we may have found the floor.”

OAG Tallies Flight, Seat Losses
European schedules are down 8% compared to April 2008, according to the Official Airline Guide, which released a study on the capacity declines prompted by the worldwide economic crisis. OAG said that flights and capacity in North America continue a sharp decline while schedules in Asia remain fairly stable. Bucking these trends in a dramatic growth in the Middle East and Africa, two areas Delta has targeted for expansion.

“The world's airlines have scheduled 6% fewer flights for April 2009 compared with the same month last year, with a 3% drop in seat capacity,” said the organization in its April 2009 edition of OAG Facts which recounts frequency and capacity trends. “This is the ninth successive month of declines, and represents a reduction of more than 136,000 flights and nine million seats year on year. The total number of flights scheduled to operate worldwide this month is 2.34 million, offering 287.3 million seats to travelers around the globe.”

Flight schedules lost with 50,854 fewer flights during the April-to-April period. Capacity within the region is down by 7% with 4.7 million fewer seats. The UK shows a steep decline with a reduction in domestic flights and capacity of 13% and 14%, respectively, while international operations are down by 10% (11,237 fewer flights) and 9% (1.6 million fewer seats).

Figures for North America show downturns of 9% in domestic frequencies and 8.1% in capacity, with a 6% drop for flights and capacity to and from the region. Airline services in the U.S. are down by 75,853 flights (-9.4%) with 6.6 million fewer seats on offer (-8.8%). International service is down year on year by 5.1% for frequencies and capacity (6,019 fewer flights and 954,000 fewer seats). North America-Asia/Pacific routes were down by the largest margin with declines of 10.1 percent in the volume of flights and 11 percent in seating capacity. The transatlantic market also took a hit with the loss of 9% of frequencies and 7.4% of seats.

“The Middle East region, however, is enjoying a significant upward trend on all counts,” said the report. “Flights and capacity for travel within the region are up by 12% and 11% respectively, while the number of flights and seats offered to and from the region are both showing growth year on year of 15% for April 2009. This represents an additional 5,701 flights and 1.2 million seats.” Flights to and from Africa are up by 6% with a 7% increase in capacity, although flights within the region are down by 1.6% with virtually no change in capacity.

"The OAG figures for April reveal some sharp contrasts,” VP Market Intelligence David Beckerman. “The Middle East and Africa, and Asia to a lesser degree, are showing growth, while Europe and North America continue to show steep declines. These contrasts can be seen also on the key long-haul routes, where transatlantic and transpacific services are down significantly compared with this time last year, while services between Western Europe and the Middle East have increased by 16%."

Flights in Latin America were down 6.4 percent having cut 12,234 flights, while seats declined 877,000 or 4.7%. Services to and from Latin America were down 4.9 percent in the number of flights having lost nearly 3,000 flights and 233,000 seats (2.4%). Flights within Central/South America have 5% less capacity,

Flights to and from Africa are up by an impressive 6% (1,753 more flights) with a 7% increase in capacity of 391,000 more seats, although flights within the region are down by 1.6% with a marginal 0.1% decline in capacity compared to April 2008. Routes between Western Europe and the Middle East, and between Western Europe and Africa, are showing an upturn in capacity of 15.2% and 4.8% respectively, compared with April 2008.

UK, Spain, Germany, Sweden and Poland were the top five countries losing the steepest declines in international seats while the top five with the greatest losses in domestic capacity were Spain, UK, Germany, Sweden and France.

“Frequencies and capacity within the UK are down year on year by 13.1% and 14.1% respectively, representing a drop of 5,078 flights and 476,000 seats for the month,” said the report, adding the declines mirrored that of 2001. “International services to and from the UK are down by 9.8% (11,237 fewer flights) with a 8.7% fall in capacity, or 1.6 million fewer seats.” OAG noted low-cost airlines cut back 16.5% domestic service and 16.1% of seating capacity and, internationally, 11.4% of flights and 11.6% of seats.

International services to and from China declined 10.1% (3,333 fewer flights) in flights and 9% in capacity (595,000 fewer seats). However, domestically flights grew 20.8% (27,087 more services) while capacity rose 22.2% (4.2 million additional seats).

Flu Coverage
Jet drama over swine flu five

Swine Flu Outbreak: Updates on Airline Policies

Swine flu has airports, airlines scrambling

S&P says airlines may be hurt by swine flu outbreak

Swine Flu and the Airlines - Let’s Not Panic

Southwest Airlines Picks the Wrong Day to Trumpet Their LinkUp With Volaris

Europe Travel `Ban' to U.S.? Says Who?

Swine flu: the dark side of international air travel

Asia Moves To Ward Off Flu Virus

Fragile’ U.S. Airlines May Lose Travelers as Flu Adds to Woes

Airline, travel sectors ready for swine flu threat

The Facts About Swine Flu - for the Airline Passenger