Geneva: Airlines, deserted by premium class passengers, are increasingly gloomy about the prospects for the coming year and some do not expect recovery until early 2011.
The International Air Transport Association (IATA) said on Thursday that fears of a prolonged recession and resurgent fuel prices had caused “renewed pessimism” for operators, which delivered their gloomiest ever assessment of profitability.
“Even the optimistic respondents don’t see significant recovery before the fourth quarter this year and others not until early 2011,” it said about its latest quarterly business confidence survey.
Leading carriers have been slashing seat prices to overcome anaemic demand during the downturn, which has also depressed cargo traffic at a double digit rate.
But passenger numbers have continued to drop, especially in the lucrative business class sector, said IATA, which represents 230 carriers including British Airways, Cathay Pacific, United Airlines and Emirates.
In its latest snapshot of premium travel, also released on Thursday, the Geneva-based group said ticket sales in the sector dropped 23.6% in May, adding to the 22% decline in April.
This was due both to more corporate travellers moving to the back of the aircraft and buying cheaper economy seats, and an overall decline in passenger numbers that shows no sign of ending soon, IATA said.
Top-tier passengers typically make up 7 to 10% of numbers but 25 to 30% of revenues.
IATA estimated that the decrease in premium traffic plus heavy discounting of high-end tickets bled airlines’ business class revenues by 40 to 45% in May.
“Premium seats are being discounted on average much more than economy seats, despite the latter usually being the more price-sensitive segment of the market,” it found. “Airlines are seeking to generate any cash they can by filling these seats.”
Economic woes explained much of the drop in business class demand for flights within Asia and from Europe to Asia.
But in the Americas, IATA said the emergence of pandemic influenza was a major factor for the sharp declines seen in May, affecting both premium and economy seats.
Overall air travel within Central America fell 62.4% in the month. Ticket sales for flights between Central America and South America were down 46.7% and from North America to Central America fell 22.9%.
While the epicentre of the H1N1 flu was considered to be Mexico, the virus has now spread worldwide and is causing mainly mild effects. The World Health Organisation is not recommending any border or travel restrictions as a result.
IATA has previously said the airline industry would lose $2.5 billion in 2009 as a result of lower demand. The sector lost $8.5 billion in 2008, pinched by high oil prices and the onset of the global credit and financial crisis.