Thursday, January 15, 2009: While there will be many factors out of the control of airlines, capacity will be an area on which airlines will focus their attentions on this year, predicts the Centre for Asia Pacific Aviation (CAPA).
With gloomy market sentiment continuing to spread, downsizing will be the focus of many an airline in the next few months, with more capacity cuts expected along with more job cuts, forecasts CAPA in a recent report.
“‘Excess capacity’ has always been a bane of the airline industry. The concept of excess capacity is a fluid one, but becomes more visible when demand suddenly drops,” said the aviation analysts.
“In these circumstances, the industry’s ability to adapt capacity to the new level of demand is limited. Fares and rates can be cut, but the negative impact on profitability is immediate.
“Aircraft can be flown less or grounded, routes can be changed. But new deliveries, following three years of aggressive buying, are hurting many of the airlines which had projected rapid expansion,” it adds.
International Air Transport Association (IATA) predicts that passenger traffic will drop by 3% in 2009, following 2% growth in 2008.? This will cause profits to plummet, with the association predicting an industry loss of US$2.5 billion for the full year.
North America is expected to perform relatively well due to the region acting earlier than most to cut capacity, as it was hit first in this global downturn and now have contingency plans in place.
Already in North America, load factors grew in December due to massive capacity cuts made early in 2008.
