The weak economy and deflationary trends are perhaps no more obvious in any part of the economy than they are in the airline and air cargo industries. The Air Transport Association reported the 14th consecutive declining month of cargo volumes for the month of October. Passenger revenue declined 15% year over year despite the 11th consecutive month of price reductions. Strong economy? Inflationary trends? Not in this part of the economy. The ATA reports:
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 15 percent in October 2009 versus the same month in 2008. This marks the 12th consecutive month in which passenger revenue has declined from the prior year, fueled primarily by the 11th consecutive month of ticket price declines.
Three percent fewer passengers traveled on U.S. airlines in October, while the average price to fly one mile fell 13.5 percent. Passenger revenue declines extended beyond the domestic United States, particularly in trans-Atlantic and trans-Pacific markets.
“With U.S. unemployment surpassing 10 percent in October, these results for air travel demand come as little surprise. Economic conditions suggest that pressure to generate revenue will remain intense for the foreseeable future,” 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 3 percent year over year (2 percent domestically and 4 percent internationally) in September 2009, the 14th consecutive month of declining volumes. October 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.
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.