Airlines in Asia Pacific were slower to feel the impact of the downturn but have arguably been the worst affected.
"We have felt the brunt more so than the USA and Europe" because the segments of the market most adversely affected are cargo, premium travel and long-haul services, says Association of Asia Pacific Airlines (AAPA) director general Andrew Herdman.
These are segments major Asia Pacific carriers rely upon greatly, he says. AAPA represents 17 of the major carriers in the region and Herdman was speaking to ATI's sister publication Airline Business.
Herdman says international cargo traffic was the first to feel the impact of the downturn and will be the first to recover along with short-haul leisure traffic.
Short-haul leisure trips can often be an impulse buy so people respond well to price promotions, which is what airlines have been doing to try and stimulate demand, says Herdman.
Business traffic and long-haul leisure traffic will take longer to recover, he says, adding that "people don't make impulse buys for long-haul trips."
Herdman declines to say when the recovery in long-haul travel will begin because it depends on when the North American and European economies recover.
He also says it is hard for carriers to predict because forward bookings are unclear. More people are waiting for ticket prices to drop further before booking, says Herdman.
But Herdman says there are signs airlines in the region have passed the bottom.
For the first four months of this year international passenger traffic, among AAPA member carriers, was down "just under 10%" but for the month of April it was down "6% so that is one of the signs there is some relief but one month's figures is not enough."
"We have passed through the worst but it is still very tough," he says.
Last year AAPA member carriers combined lost $4.3 billion compared to a profit of $4 billion in 2007.
The AAPA has a policy of refraining from giving financial forecasts but clearly another loss is likely.
Herdman says the impact of the current economic downturn is greater than 2008's high fuel prices because the downturn "affects top line revenues."
He says if one had a choice between a strong economy and high fuel prices and a poor economy and low fuel prices one would pick the strong economy because people are willing to pay higher ticket prices in a strong economy.
When asked about the impact of swine flu he says "it hasn't really had any impact on travel patterns" in AsiaPacific whereas the SARS outbreak in 2003 "had a very severe impact."
Airlines in Asia Pacific have responded to current downturn by cutting capacity and reducing staff costs, says Herdman.
But rather than retrenching staff, airlines have generally been reducing staff costs by cutting bonuses, getting employees on unpaid leave and ensuring salaries have a greater variable component, he adds.
Source: Air Transport Intelligence news
