International Air Transport Association (Iata) CEO Giovanni Bisignani said on Thursday that global air freight and passenger demand remained weak, with passenger demand dropping by 7,2% in June, and cargo demand falling by 16,5% compared with a year earlier.

International passenger load factors stood at 75,3%, down from 77,6% recorded in June 2008.

The 7,2% drop in international passenger demand was a slight improvement on the 9,3% fall in May. The capacity adjustment of -4,3% did not keep pace with the fall in demand leaving average fares and yields under significant pressure. As a result, June revenue on international markets fell by between 25% and 30%.

Iata reported that cargo demand remained weak at 16,5% below June 2008 levels. This was a moderate improvement, albeit from extremely weak levels, over May, which was 17,4% below 2008 levels.

“There has been some improvement in world trade and, after adjusting for seasonal fluctuations, freight volumes rose 6% from the low point recorded in December 2008. However, the utilisation of air freight capacity on international routes remained very weak (47,3%) in June, due to unbalanced trade flows with Asia and some market share loss to ocean transport,” Iata said.

Bisignani said that while it appeared that there was stabilisation in some markets, this cames at a steep price.

“Capacity cuts have not kept pace with demand falls. Even with lower fares, the load factor remains 2,3% below last year’s levels. Airlines are seeing international revenue falls of up to 30% at the start of the busy June-August period when airlines traditionally make their money. The outlook remains bleak.”

Iata noted that the regional pattern of air travel was mixed in June, with African carriers struggling with a 5,9% fall in traffic on international routes. Since many African economies were growing despite the global recession, this drop in demand represented market share loss.

The Asia-Pacific carriers recorded a 14,5% fall in demand in June compared with the same month a year ago, following a 14,3% drop in May. Fears about swine flu have also contributed to delaying any early revival in air transport, Iata reported. It said that initial estimates suggested that the impact of the swine flu virus took up to 4% points off growth rates for the region’s airlines in June.

The North American airlines reported a relative improvement in June, with demand falling 6,7% in the month, compared with the 10,9% fall in May. The smaller decrease was likely owing to discounting, Iata stated.

Load factors of 82,6% were the highest of any region, but revenue from international markets was down about 29% in June, the same as the previous month.

The European carriers saw traffic fall 7,1% in June, not as deep as the May decline of 9,4%. Load factor for June was 77,3% for the region.

Latin American airlines posted a 4,7% fall in passenger demand, significantly better than the 9,2% drop in May. There were also early indications that the region was starting to recover from the swine flue crisis, which hit in May.

The Mexican carriers reported a 25% decline in demand, an improvement from the 40% drop in May. There is still uncertainty around the spread of Influenza A(H1N1) and its affect on travel.

Middle Eastern carriers remained the “bright spot” with strong 12,9% growth in demand with a 15,2% expansion of capacity. The region’s airlines were growing market share with particularly strong traffic growth on routes to Europe and Asia.

CARGO STILL CONTRACTING

In June, freight demand remained relatively stable, but at a level 16,5% lower than the same month last year, traffic remains weak.

The month marked the thirteenth consecutive month of contracting demand for international air cargo. Despite reaching a bottom in December, improvement has been slowed by high inventory levels and soft demand.

Iata said that, at the current pace, it would likely take several years before demand returned to early 2008 levels.

African carriers saw demand decline by 20,2%, while Asia-Pacific airlines reported a 15,8% drop in June. While still extremely weak, this was an improvement compared to the 18,1% fall in May. Iata reported that it reflected improved economic conditions in a number of emerging Asian economies, such as China.

It reported that the economic recovery in Europe and North America was being held back as consumers choose to repay debt rather than increase spending, while European carriers saw the weakest demand for freight, which dropped by 20,3% in June.

This was a softening in demand from the fall of 19,2% experienced in May. North American carriers reported an 18,6% fall in June demand. This was relatively unchanged from the 18,8% decline in May.

Middle Eastern carriers reported a 4,2% decline in freight demand resulting in a 40,2% load factor, while Latin American carriers saw demand fall by 14,2%. Freight load factors in these regions were the lowest at 26,6% and 31,6%, respectively.

“These are extremely challenging times for airlines. There are no signs of an early economic recovery. Other external risks are potentially great, including rising oil prices and the impact of swine flue on demand. Cash flow is threatened by weak demand, exaggerated by fare discounting. And, after years of cost reduction, the scope for further cuts is limited,” noted Bisignani.

“Flexibility is critical in finding new sources of capital and new markets. This crisis highlights the need for governments to replace outdated restrictions on ownership and market access with modern commercial freedoms. Quick action is needed.”