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Airlines to hit headwinds

Oct 03 2011 15:20
James-Brent Styan
Cape Town - The International Air Transport Association (Iata) said on Monday that while global airlines are bracing for tough times, carriers in Africa are adding more seats than demand justifies.

This means flights are getting emptier and ticket prices are unsustainably low, adding pressure on airlines' already thin margins.

Tony Tyler, Iata director general and CEO, said economic uncertainty owing to the European sovereign debt crisis and the growing likelihood of a protracted period of slow growth in developed economies mean the industry will be even more focused on reducing costs and improving efficiency.

“To ensure that airlines can continue to catalyse economic activity, we need governments to review the often onerous tax burdens that they place on aviation,” said Tyler.

Passenger demand was up 4.5% over the previous August - a significant drop from the 6.0% recorded in July. Freight market decline accelerated even further. The 3.8% contraction in freight markets recorded in August was more than double the pace of July’s 1.8% fall.

“The industry has shifted gears downward. The pace of growth in passenger markets has dipped and the freight business is now shrinking at a faster pace.

"With business and consumer confidence continuing to slump globally, there is not a lot of optimism for improved conditions anytime soon.”

Global passenger load factors were at 81.4%, almost as high as in July while international passenger demand was up 6.2% in August compared to the previous year.

However, compared to July demand contracted by 1.8%. African carriers - which include South African Airways and Comair - reported a 5.2% demand growth against a capacity expansion of 6.3%.

This means there was 6.3% more seats available on African carriers than in August 2010, but demand only grew by 5.2%.

This overcapacity increases the tight margins carriers have to cope with and also means that African carriers reported the lowest load factors at 70.0% for August.

airline industry  |  iata
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