European Regions Airline Association director general Mike Ambrose has urged his members to adapt to the economic climate after highlighting indications of a "considerable worsening" in demand this year.
Speaking during ERA's regional airline conference in Warsaw, Ambrose said 2008 started "pretty well", but the numbers conceal a "pretty disastrous" third quarter, when traffic "dropped away dramatically" and yields weakened. ERA's 60 member carriers collectively added 4.6%capacity, but demand rose only 3.5%, pushing its members' load factor down half a point to 64.5%. SH&E principal Steve Fletcher estimates the industry has effectively lost three years' growth.
Watch the full ERA video interview with director general Mike Ambrose below:
Ambrose says even airlines with sound business plans are at risk because of weak cash flow, as the economic crisis blocks their access to sufficient liquidity to continue operations. Ambrose says around 40% of recent airline failures have been driven by this issue. "Sadly it will be unavoidable in our industry that there will be some casualties," he says. "But we are renowned for our objectivity and creativity. We've survived other crises and we'll come through this."
Ambrose quotes Eurocontrol figures which forecast modest growth in most states from 2010. "Within 2010-11, traffic levels are expected to correspond to those of 2005 and 2006, when the industry was viable and made money," says Ambrose. "What we've got to do is adapt."
The mood among regional carriers is cautious over the likelihood of arecovery kicking in next year. "Right now there are signs this is the bottom, but we can't be sure of that. We have to wait and see how the situation develops," saysLOT Polish Airlines network management director Marek Serafin, while airBaltic president Bertold Flick adds: "We might see some light in 2011, but not this year. At the moment it looks like the speed of the downturn is actually increasing."
Source: Airline Business
