Return to growth "still some way off": Association of Asia Pacific Airlines

Asia Pacific full service airlines experienced an easing of traffic reductions in Jul-2009, according to the Association of Asia Pacific Airlines (AAPA), although members continued to experienced weak passenger and freight traffic, with demand still significantly below 2008 levels.

AAPA Director General, Andrew Herdman, added that a “return to growth is still some way off”, despite some “encouraging signs of broader economic rebound” taking shape across the region.

AAPA RPK growth and ASK growth: Aug-08 to Jul-09

Long haul traffic demand remaining “particularly weak”

AAPA members carried a total of 11.5 million international passengers in Jul-2009, down 7.8% year-on-year, following Jun-2009’s 16.5% reduction, while RPKs declined 8.5%, indicating that long-haul traffic demand remains “particularly weak”, according to the industry body.

Member carriers also experienced 1.7 ppt deterioration in international passenger load factors to 76.6%, with the 6.5% capacity (ASKs) reduction not quite matching the decline in demand. 

AAPA PAX growth and PLF: Aug-08 Jul-09

Air cargo only slowly improving

But cargo load factors finally improved in Jul-2009 - the first increase in 11 months. Air cargo traffic volumes showed a more moderate decline compared to previous months, with AAPA international freight tonne kilometers (FTKs) down 11.4% year-on-year, following a 17.4% contraction in Jun-2009 and a cumulative 20.8% decline in the seven months to Jul-2009.

Average international cargo load factor improved 0.6 ppts to 66.9% in the month, as cargo capacity was reduced by 12.1%.

AAPA FTK growth and FATK growth: Aug-08 to Jul-09

Outlook: Airlines reduces fares to stimulate demand, but yield pressures will result

In attempting to manage their way through the current crisis, airlines remain “focused on further cost-cutting measures, whilst offering highly competitive fares and travel packages aimed at winning back more passengers,” according to AAPA.

However, airlines remain under “enormous pressure” and fare-reduction strategies (to arrest the demand weakness) is resulting in lower yields, which will further undermine revenues and affect profitability.

Further complicating the prospects of recovery in the region is the added concern that oil prices remain “stubbornly high”, which AAPA stated “could derail what is likely to be a fragile recovery for the global economy.”

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