Airlines struggle to fill seats

Larger capacity cuts planned - IATA

Airlines are reacting to falling demand by cutting capacity "at an increasing rate," the International Air Transport Association (IATA) said.

The Association said the number of seats filled had taken a "marked turn for the worse" in January and February, despite accelerated capacity cuts.

The figures, released in IATA's financial health monitor, revealed an overall decline in capacity of 5.9% in February year-on-year.

"Further and larger cuts are planned but it remains difficult to do this quickly enough to keep up with the slump in demand," said IATA.

IATA said capacity cuts first started in the US last year but it was not until February that significant reductions were made.

"Passenger travel has not found a floor and is now declining at a faster rate," IATA said.

"The comparison with February last year is distorted by the Leap and Chinese New Year, but even so there was an accelerated decline in air travel."

Revenue per kilometre (RPK) was down 10.1% in February compared to last year and falling at a faster rate than yields, according to IATA.

"Load factors have fallen so fast because the deepening recession has cut away the foundations for travel demand, but in addition yields are now falling as well as volumes," it said.

The Association said maintaining load through reducing capacity was "not good for profits."

Oil prices have stabilised this year, said IATA, but it could not rule out another "downward leg."

It said markets were anticipating no further deterioration following OPEC cuts and the recent economic rescue packages.

IATA said airline stock value had "moved sideways" this month on average, but down 18% from the start of 2009 after markets had reacted to "the recent bad news on Q4 profits."

www.iata.org