Saying that the industry will show a 22% contraction in the number of flights through the end of 2009, the Air Transport Association expects Labor Day traffic to drop 3.5% from the year-ago period for the eight-day, last-fling-of-summer travel period. ATA also anticipates a 3% decline in international travel with both declines occurring despite system-wide, year-over-year, average-fare declines in each of the first six months of this year.

In addition, OAG noted that capacity in August showed the first growth, albeit modest, in a year while IATA said business and first class travel is stabilizing. However, a recent an International Air Transport Association survey of airline managers said little recovery would come before 2011.

ATA , citing the recession and oil volatility as primary drivers for the declines, forecasts that 16 million passengers will travel globally on U.S. airlines during the Sept. 2 through Wed., Sept. 9 travel period, compared to 17 million passengers estimated to have traveled on U.S. airlines during the same period last year.

Looking ahead through the end of 2009, the economic climate's toll on air service is evident in the schedule. The most current schedule filings for October through December, for example, show 22 percent fewer domestic departures than in the same period of 2000 – a reduction of approximately 6,660 flights per day. Also, over the past two years, all 67 airports defined by the Federal Aviation Administration as large or medium hubs show a reduction in the number of scheduled flights.

"Passengers should expect airports to be less crowded, but planes will be at or near capacity during this Labor Day holiday period," said ATA President and CEO James C. May. "Economic uncertainty and persistently high energy prices for consumers and businesses continue to impact demand for air travel. Now is a great time to fly. Low fares are making travel to all corners of the world very affordable.”

Slight Capacity Growth
Meanwhile, OAG reported a 0.2% gain in capacity over August 2008, the first month of positive growth for the year. The world's airlines have 314.2 million seats on offer this month, a rise of 0.2% (472,839 more seats) over August 2008 levels.

"After a year of capacity cutbacks, it is encouraging to see positive numbers in the year on year comparisons,” David Beckerman, vice president OAG Market Intelligence, said. “August is traditionally one of the busiest months for air travel, and it will be interesting to see if the steady upward trend we have seen since May continues once the summer vacation season draws to a close."

Frequencies remain down compared to August 2008, however. The world's airlines have scheduled a total of 2.53 million flights for August 2009, down by 2% (52,043 fewer flights) compared with the same month last year. Last month, the year on year global frequency figure was down by 3% and capacity was down by 1%.

Link to OAG Chart
Assets/OAG1a.jpg

IATA: Yields at Issue
The stabilization of passenger numbers is coming at the expense of yields as airlines seek to book cash flow, said the International Air Transport Association in its latest traffic report released this morning. "Passenger travel numbers in June are now indicating some stabilization in air travel demand... Notably the decline moderated in both premium and economy travel in June," IATA said in its monthly Premium Traffic Monitor.
The bottom seemed to come in March, said the organization with coach numbers, largely owing to business travelers opting for cheaper seats rather than a true stabilization of demand. Airlines immediately launched deep discounts of premium seats as a result. Premium revenues dropped by a whopping 40% in June, especially significant since it makes up only 7-10 percent of numbers but 25-30 percent of revenues

In June the number were 7.1% lower than the year-ago period compared to a 9.2% drop in May. Economy was down 5.5% in June from the year-earlier period and compared to the 7.6 % dive economy took in May.

"Adjusting for seasonal fluctuations passenger numbers were broadly unchanged in June compared with levels in May," it said. "The issue now is that this stabilization of passenger numbers is partly being achieved at the expense of much lower yields, as airlines seek to boost cash flow by making more cheaper seats available."

Region by region, the organization said that signs of recovery where not worldwide as the Asian market continues to cope with H1N1.

"There are lags in any cyclical recovery but on the European short/medium-haul market this does suggest some further structural decline in premium travel," said IATA noting that business travelers continue to book economy or budget airlines. Ominiously, it suggested short-haul regional traffic may never return.

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