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| Version | User | Scope of changes |
|---|---|---|
| Oct 12 2008, 1:22 PM EDT (current) | jimglab | 421 words added |
| Oct 12 2008, 1:21 PM EDT | jimglab |
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Carriers serving banking centers expect drop-off
With the stock market plummeting daily, the world’s credit markets frozen, and governments scrambling to keep their banks from collapsing, the global airline industry is bracing for a major hit on its bottom line due to a falloff in high-ticket business travelers. The bad news comes just as carriers were finally starting to see some relief from record high fuel prices. We’ve already reported on how passenger numbers on U.S. airlines’ domestic networks have been dropping in recent months. But now the business travel decline looks to be going global – and it’s especially troublesome in the premium cabins, which account for a major piece of airlines’ profitability. One ominous note came last week from British Airways, which said that its first class and business class traffic during September dropped a dramatic 8.6 percent from the same month a year ago – a much steeper decline than BA’s reduction of 4.1 percent in economy class travel in September. On the Pacific side, France’s press agency last week got hold of Cathay Pacific’s latest internal newsletter, in which CEO Tony Tyler saw a “serious worry” in the airline’s booking patterns as financial industry traffic in and out of Hong Kong appears to be flat-lining, with the first and business class cabins especially hard-hit. “When banks, our biggest corporate customers, cut or even curtail their travel plans, we know we can expect to be in for a rough ride,” he said. And Cathay’s general sales manager wrote that many business customers are “trading down – from first to business class, or business to economy, and a number are cutting travel altogether.”
The International Air Transport Association, a trade organization for the world’s airlines, said global passenger traffic could be heading for a fall, based on midyear numbers. While worldwide passenger traffic rose by 5.4 percent in the first half of 2008, it slowed to just 1.9 percent growth year-over-year in July and 1.3 percent in August, IATA said – and that was before the economic crisis really took hold. “The slowdown has been so sudden that airlines can’t adjust capacity quickly enough,” said IATA director general Giovanni Bisignani. He noted that even with the recent drop in oil prices, fuel costs are still running 30 percent higher than a year ago. “With traffic growth continuing to decline, the industry is still heading for a $5.2 billion loss this year,” he said. “The industry crisis is deepening, and no one is immune. Urgent measures are needed,” Bisignani said.
