World's Airlines Still Losing Money But At A Slower Pace

The global recession for the world's major airlines eased in July, but they are still suffering through one of their worst years ever.

Although passenger demand continued to decline in July, it was at a significantly slower pace than in June, according to the International Air Transport Association in Geneva, Switzerland.

"The 2.9 percent decline in passenger traffic was a relative improvement on the 7.2 percent drop in June from the same months in 2008," IATA spokesman Anthony Concil said.

The June-July-August peak travel season is when passenger airlines are most profitable. This year, revenues have been sharply lower.

A Slow Recovery Forecast

IATA forecasts a nearly 18 percent decline in revenues for 2009 (from 2008 levels) to $448 billion leading to an overall loss for the industry of $9 billion although the organization's "worst case scenario," does not foresee any airline failures.

"If there is a sharp increase in the price of oil, that could change," Concil said in describing this as the worst crisis to hit the industry since 2001 when the terrorist attacks on the United States sent revenues plunging 7 percent.

IATA is forecasting a recovery period for the airline industry of two to three years.

Airlines around the world have seen passenger demand on the decline this year, with the Asia-Pacific region being hit the hardest.

(see chart)

European and North American carriers saw smaller declines in July as a result of deep discounting in the face of excess capacity.

The Middle East was the only region to show growth as airlines grabbed a greater market share in traffic between Europe and Asia.

"Conserving cash, effectively managing capacity and cutting costs will be the long-term theme for every airline business for the foreseeable future," Concil said.

Freight Shipments Down As Well

Causing further financial hardship for the airline industry is a drop in freight shipments. The IATA reports the world's airlines freight dropped 11.3 percent in July compared with July 2008. Still, that was an improvement over 16.5 percent overall drop in June compared with the same period last year.

Freight carriers are benefiting as companies re-stock inventories that have been depleted during the recession.

But, in a report released Thursday, Concil said improvements in demand will level off once inventories reach their desired levels.