Monday, September 22, 2008

Asian air travel has a 'significant downwared trend'

Lala Rimando, | 09/22/2008 6:35 PM

Business travelers to Asian countries have been waning as a result of the US financial woes and lower business confidence, an aviation industry body said. 

According to the International Air Transport Association (IATA), the Lehman Brothers’ bankruptcy “underlines the shrinkage of merger and acquisition and other financial sector activity, leading of course to a reduced number of business travellers from financial services.” 

IATA noted, too, that falling air freight volumes and lower business confidence “suggests that world trade and travel from the manufacturing sector is also in decline”. 

As the economic environment worsens, IATA warned of a “significant downward trend" in travel growth. The market for premium travel is already going through a beating. 

Worldwide premium demand fell 1 percent in July 2008, following a 0.4 percent fall in June 2008. In the first six months, premium travel grew by an anemic 1.5 percent. 


Within Asian countries, premium travel already struggled in July. Based on available IATA data, premium travel within the region fell 6.8 percent compared to the same period last year. 

Meanwhile, premium traffic between Asia and two regions, Europe and North America, was also subdued. According to IATA, this suggests that the traffic slowdown has been exaggerated by the travel restrictions associated with the Olympics in China, adding “some rebound may occur in the next few months”.

But the general outlook remained bleak. Leading economic indicators in the US point to further weakening in economic conditions in the world’s biggest economy. FedEx Corp already stated that it expects the US economy would grow by 1.9 percent in 2008 and by a "similar" rate next year. Tepid growth in the US and recessions in key European economies paint a challenging outlook for premium-focused airlines.

But could the business travelers been switching from premium to economy class? Not really. IATA noted that premium travellers are “a relatively price-insensitive sector.”

1 comment:

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