Traffic Rises as Yields Continue to Fall

1st Dec 2004

IATA reported a 10.8% year-on-year increase in scheduled international traffic for
October that took year-to-date traffic growth to 16.9% compared to first 10 months
of 2003. International cargo traffic posted similar gains of 12.4% for October 2004
compared to October 2003 and 14.0% for the first 10 months of 2004 compared to the
same period for 2003. “Despite a negative economic environment and continued uncertainty in the price of
oil, international traffic is growing at breakneck speed. Unfortunately traffic
growth and profitability do not always walk hand in hand and we still expect
industry losses in excess of US$4 billion for this year,” said Giovanni Bisignani,
IATA’s Director General and CEO.

“The sharply reduced value of the US dollar is changing some of the industry’s
short-term dynamics,” said Bisignani.  It is an incentive for travellers to visit
the US at a time when many US carriers are re-deploying capacity from low-yielding
domestic markets to higher yielding international routes. On the cost side, it
improves the competitiveness of US carriers, but also provides some relief to non-US
carriers battling the continuing extraordinary price of fuel.

Load factors averaged 74.6% for the first ten months of the year but yields continue
to suffer from intense competition.

“Unpredictable economic factors continue to challenge and force change on the air
transport industry. More than ever, a low cost base and the freedom to respond to
dynamic market forces are critical,” said Bisignani. “As airlines struggle to end
2004 with a 2.5% reduction in non-fuel unit costs, IATA’s Simplifying the Business
initiative is the cornerstone for achieving even greater efficiencies,” said
Bisignani. Over 450 airline representatives attending the first Simplifying the
Business Conference committed to achieve 100% e-ticketing by the end of 2007. E-
ticketing alone will save the industry US$3 billion and is the lead item in an
agenda to leverage technology to industry processes—improving service levels and
reducing costs.

“The other side of the story is that governments must give airlines the freedom to
run their businesses like normal businesses. We need a liberalised and level playing
field with a harmonised set of rules,” said Bisignani. “With a new Commission in
Europe and the US elections over, as a matter of priority we must achieve a
substantial agreement on an Open Aviation Area for Europe and the US. This should be
a model for the much-needed progressive liberalisation of our industry. Growth is
one thing, but we must be profitable in order to keep meeting public demand for air
travel. The 60 year-old bilateral system does not give us the flexibility to
effectively respond to the rapid-fire succession of shocks that are the reality of
business today,” said Bisignani.



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