IATA expects smaller declines in cargo traffic for remainder of 2009

By Brendan Sobie

IATA expects the cargo market to begin showing signs of a slight pick-up with freight volumes dropping about 10% over the next few months, compared to the 22-23% declines recorded in recent months.

IATA last week reported a 22% year-over-year drop in international FTKs for February. This follows 23% declines in January and December, but IATA chief economist Brian Pearce does not expect such precipitous drops to continue.

“There may be some light at the end of the tunnel with air freight,” Pearce told reporters today during a briefing at IATA’s Washington office. “We seem to be reaching a floor.”

He adds the cargo market “is no where near the point” where a full recovery is expected but “we’re looking more at 10% drops” in monthly freight volumes.

Pearce says the amount of freight carried by IATA members has been relatively flat the last few months. He expects there could be a slight pick-up in this figure over the next few months but FTKs will still be roughly 10% below last year’s levels.

IATA began recording year-over-year drops in FTKs last June but for the first three months – June, July and August – the drops were less than 3%. In September and October the drop reached 8% and in November it reached double-digit figures at 14%.

Pearce says IATA bases its projection that cargo traffic will go “sideways” rather than down the rest of this year partly on surveys which show shippers are not as unoptimistic as they were a few months ago. Inventories are also at record lows and cargo carriers including FedEx have recently indicated they are seeing some stabilization in the market.

Pearce, however, warns IATA’s cargo projection could prove to be wrong. He says while cargo figures appear to be holding at a shelf at the bottom there is always a possibility there could be another fall from this shelf.

If IATA is “wrong about cargo” Pearce says it may have to revise again its 2009 loss projection. Last week IATA revised its projected losses for the year, estimating its members will collectively incur $4.7 billion in losses in 2009 compared to its previous projection of $2.5 billion. But Pearce says actual losses could be even worse if the cargo market doesn’t start to pick up as expected.

Pearce calls the drops recorded in the cargo market the last three-to-four months unprecedented and says they were driven by drops in manufacturing. He says manufacturing output in five of the world’s major economies – Japan, the US, Germany, South Korea, and Taiwan – have all declined by 15% to 30%. He explains manufacturing is a “pretty fast indicator of what’s happening in the economy” and these drops “reflect what is happening with international trade”.

Pearce adds: “Since November and December there’s been extraordinary fall in air freight [FTK]. They are down pretty much one quarter, which we never saw before.”

While IATA sees cargo figures having bottomed out in February Pearce says “that’s not the case with passenger travel”. IATA passenger volumes were down 10% in February, surpassing the 6% drop recorded in January and the 5% drops recorded in November and December.

“Passenger travel continues to be declining,” Pearce says. “We haven’t seen yet an end to this process. Hopefully it will happen sometime soon.”

Hawaiian plans to quietly introduce premium meals

By Lori Ranson

Hawaiian Airlines plans is introducing meals for purchase on long-haul flights in addition to complimentary meals the carrier already offers.

The airline last year completed a three-month trial of selling meals, and now is offering various options to customers for $10 on long-haul flights from domestic US markets to Hawaii.

Hawaiian VP of inflight services Louis Saint-Cyr told ATI at the Phoenix Sky Harbor Aviation Symposium last week that the carrier is not advertising for purchase the meals yet.

Saint-Cyr says Hawaiian’s cashless cabin that’s been in place since 2005 will effectively help the carrier manage demand for buy-on-board meals as the carrier will know immediately “how we are doing”, and if the right amount of inventory is present

He declines to give revenue projections based on Hawaiian’s test last year.

However, during a panel discussion about buy-on-board United Airlines SVP marketing Dennis Cary said the carrier used to spend $100 million on free food for economy passengers about five years ago. Since transitioning to buy-on-board offerings Cary explained United now essentially breaks even earning roughly $20 million while spending $20 million on the offering.

German carrier Blue Wings suspends operations

By Victoria Moores

German scheduled and charter airline Blue Wings has suspended flights after hitting financial problems.

Dusseldorf-based Blue Wings, which launched services in 2003, operates nine Airbus A320s primarily linking Germany with Turkey and Russia. It has a further 20 A320 family aircraft on order

A Blue Wings spokesman confirms that the German CAA (LBA) has suspended the airline’s operating licence.

According to Flight’s ACAS database, Blue Wings owns all but two of its nine A320s. One of the remaining aircraft belongs to Jetscape. The owner of the final aircraft is unknown.

© TT/AirTeamImages.com

FAA Forecasts 2009 Dive

By Jennifer Michels

The FAA kicks off its 34th Annual Aviation Forecast Conference today in which it will reveal its expectations that airline profits and traffic for the most part in 2009 will fall sharply from last year, will plateau in 2010, and not take off again until 2011.

In its 2009-2025 forecast being released today, FAA’s predictions are tied closely to assumptions by the Obama Administration of when the economy will flatten out, and to rates of inflation assumptions. The administration believes the economy will begin to turn around at the end of this year, and start growing again in 2010, whereas other analysts and forecasters are more pessimistic.

The forecast assumes U.S. real GDP will increase from $11.7 trillion in 2008 to $18.3 trillion in 2025, which is an average annual rate of 2.7%. World GDP is forecast to grow at a slightly faster pace — 3% — from $50.1 trillion to $82.8 trillion.

Total mainline air carrier and regional enplanements are expected to rise from 757.4 million in 2008 to 1.1 billion in 2025, an average annual rate of 2.2%. Domestic enplanements are expected to decrease 7.8% this year, and then grow at an average annual rate of 2.7% for the remaining 16 years. International enplanements are forecast to decrease 2.5% this year, and then average 4.3% growth per hear. Total system enplanements are expected to hit 1 billion in 2021; an earlier forecast pegged that at 2016.

Regional airlines are expected to see enplanements fall 4.5% this year, but then grow 3.5% per year, reaching 257.6 million in 2025, up from 153.5 million this year. Regional jets should increase from 1,655 aircraft last year to 2,249 in 2025, with all of the increase coming in the 70- to 90-seat category.

Cargo revenue ton miles should be down 7.6% this year, but will then see an average growth of 4.2%. FAA predicts that cargo RTMs for U.S. commercial carriers will be down 8.3% domestically and 7.2% internationally. The cargo fleet should increase from 949 aircraft last year to 1,584 in 2025.

Total passengers to and from the U.S. on any airline is projected to fall 0.9% this year. The average annual rate of growth from last year to 2025 is expected to be 4.2%, with Asia/Pacific growing the fastest at 5.2%, followed by Latin America at 4.3%, the Atlantic at 4% and Canadian transborder 3.2%. The growth in passenger traffic in Asia is being seen mostly in China and India, and in Latin America, it is in Brazil and Mexico.

Photo: Benet Wilson

Boeing To Deliver USD$17 Bln Of Planes To India

Boeing will deliver 100 planes worth USD$17 billion over the next four to five years in India, the president of its Indian operations said on Tuesday.

“We clearly want to extend our footprint in India,” Dinesh Keskar, president of Boeing India, told reporters at the launch of Boeing’s research and technology center in the southern city of Bangalore.

Last year Boeing had projected India would need 1,001 aircraft worth more than USD$105 billion over the next 20 years and Keskar said the forecast was still valid despite an economic downturn.

Boeing has not seen any cancellations of its orders for civilian aircraft from Indian carriers, though Jet Airways deferred the order of two aircraft last year, he said.

Boeing and Airbus have seen new orders for planes slump as many major economies have slid into recession.


Boeing will pay compensation to national carrier Air India and Jet Airways for the delay in delivery of the 787 Dreamliner, Keskar said, but declined to quantify.

Rival Airbus was forced to pay hundreds of millions of dollars in compensation after its A380 superjumbo fell two years behind schedule. Now Boeing may face similar claims.

More than 50 airlines are waiting for 892 Boeing 787s, worth a combined USD$145 billion at list prices.

Earlier this month Boeing said it was working towards the first delivery of the delayed 787 in the first quarter of 2010. It said it was on track to make its first test flight of the aircraft in the second quarter of 2009.

Air Canada CEO Resigns

Air Canada said its chief executive Montie Brewer resigned, effective April 1.

Calin Rovinescu, a former senior executive with the airline, will succeed Brewer, the company said in a statement late on Monday.

Last month, UBS analyst Fadi Chamoun said the airline could be forced to file for bankruptcy protection if it does not secure additional financing and succeed in renegotiating covenants in credit card agreements.

The airline reported a worse than expected fourth-quarter loss in February on waning passenger revenue and sharply higher costs, and said it aims to wrest more savings from operations to preserve cash.

“While the challenges in front of us are large, we will continue to build upon the successes of the airline to date and deliver a quality product for our customers, employees and shareholders,” Rovinescu said in a statement.

Rovinescu, who is the co-founder of Genuity Capital Markets, a Canadian investment bank, was previously chief restructuring officer at Air Canada.

US Pilots Union Staff In Dispute With Employer

The world’s largest airline pilots’ union is getting a taste of its own medicine as workers in one in its divisions have filed a complaint of unfair practices against their bosses, the workers’ union said on Monday.

It’s an unusual twist in the organized labor movement, pitting a unionized staff against its employer — which itself is a powerful labor union.

The parties in the dispute are the Air Line Pilots Association Professional and Administrative Employees (UALPAPAE) and the Air Line Pilots Association (ALPA), which fights for the rights of pilots at United Airlines and other carriers.

“When it comes to its pilot members, ALPA is a major champion of the pilots’ rights to fair labor practices,” said Jay Wells, president of United’s unit of UALPAPAE. “But when it comes to the well-being and welfare of its own staff, ALPA management seems to adopt a different set of labor union principles.”

The in-house professional employees’ union, which represents 170 staffers that include lawyers and lobbyists, has complained to the National Labor Relations Board that ALPA management failed to meet its obligation to disclose information requested about ALPA’s plan to lay off 10 professional employees of this year.

ALPA’s contract with its professional employees expires Tuesday, and the two sides are in talks on a new labor deal.

The ironic complaint is not without precedent. In 2006, the union representing professional employees of ALPA’s Delta Air Lines unit went on strike over a labor contract. That unit’s contract is set to expire April 30.