Global air traffic falls for first time since 2003

Global airline-passenger traffic fell in September, the first drop in five years, as the credit-market crisis and slowing economic growth deterred tourists and business executives from flying.

Traffic, or the number of passengers multiplied by the distance flown, declined 2.9 per cent from a year earlier, with freight traffic dropping 7.7 per cent, the International Air Transport Association said today. Passenger traffic hasn't fallen since the severe acute respiratory syndrome outbreak in 2003, while the cargo figure’s drop was the first since the technology-stock bubble burst in 2001, IATA said.

“This industry is in a perfect storm,” IATA Chief Executive Officer Giovanni Bisignani said on a conference call from Istanbul. “At this rate, losses may be even deeper than our forecast of $5.2 billion for this year” for the industry.

Even as oil prices have tumbled to about $67 a barrel from a record of $147.27 on July 11, the financial-industry crisis has slowed demand for business-class travel, which provides the bulk of airlines' earnings. Air France-KLM Group, Europe's biggest carrier, said today that meeting full-year earnings targets will be “very difficult” as traffic growth weakens.

Seat occupancy rates, or load factors, fell 4.4 per centage points from August to 74.8 per cent in September, Montreal- and Geneva-based IATA said, without giving a year-earlier comparison.

Air France Stock: Air France fell as much as 9.8 per cent in Paris trading, following a 13 per cent drop in the shares on Thursday, after the airline said in a statement. that it will struggle to reach an operating-profit goal of ¤1 billion ($1.26 billion) for the 12 months through March 2009.

Bisignani is in Istanbul for a meeting this weekend with aviation officials from 14 countries plus the European Union to discuss how to help airlines deal with the economic turmoil. A key topic will be enabling carriers from different nations to merge, he said.

“We cannot merge across borders because of many ownership restrictions and carriers' inability to combine is killing us,” Bisignani said. “As a result, we're the most fragmented industry in the world, with at least 1,000 airlines. How many car makers do you know? 20? Chemical companies? 30?”

The weekend meeting, the first of its kind, was organised by IATA to push governments to consider revising international treaties regulating air travel. In addition to relaxing rules on airline ownership, measures up for discussion will include increasing carriers' access to routes outside their own markets to help bolster competition.