Trends in airline passenger traffic and air cargo continue to reflect that of other transportation sectors – a deep recession. Cash strapped consumers continue to choose cheaper forms of transportation as 6% fewer passengers chose airlines this year as their mode of transportation. The weakness in the economy was also reflected by the 13% decline in air cargo. Most alarming is the high level of consumer weakness and deflation exhibited in the airline industry. Despite sharp price cuts passenger traffic continues to decline. In addition, despite fuel prices that are nearly 50% from their peak we continue to see cargo decline – a clear sign that the economy is still far from the recovery markets appear to be pricing in. From the ATA:
WASHINGTON, Sept. 21, 2009 – The Air Transport Association of America (ATA), the industry trade organization for the leading U.S. airlines, today reported that passenger revenue, based on a sample group of carriers, fell 21 percent in August 2009 versus the same month in 2008 – the 10th consecutive month in which passenger revenue has declined from the prior year.
Six percent fewer passengers traveled on U.S. airlines in August while the average price to fly one mile fell 17 percent, a slight improvement over the 18 percent year-over-year yield decline observed in July. Revenue declines extended beyond the domestic United States to the trans-Atlantic, trans-Pacific and Latin markets.
“The industry continues to see a reduction in the number of air travelers, despite double-digit declines in fares. While there are signs that improvement may be on the horizon, regrettably the demand for air travel remains weak,” said ATA President and CEO James C. May.
Also reflecting a weak global economy is the continued decline in cargo traffic. U.S. airlines saw cargo revenue ton miles decline 13 percent year over year (11 percent domestically and 15 percent internationally) in July 2009, the 12th consecutive month of declining volumes. August 2009 cargo data is not yet available.
Annually, commercial aviation helps drive $1.1 trillion in U.S. economic activity and more than 10 million U.S. jobs. On a daily basis, U.S. airlines operate nearly 28,000 flights in 80 countries, using more than 6,000 aircraft to carry an average of two million passengers and 50,000 tons of cargo.
If we’re on the verge of a sharp recovery we’re sure not seeing it in the likeliest of places – consumers and transports….
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.