Airlines need to tackle a dramatic plunge in revenues in the industry's "worst" crisis ever, IATA said on Thursday as international air travel continued to drop in May partly due to swine flu.

Despite signs that the slump in passenger traffic since late last year may be tailing off, the International Air Transport Association (IATA) said there was still significant excess capacity in the airline industry.

"We may have hit bottom but we are a long way from recovery," IATA Director General Giovanni Bisignani said in a statement.

Passenger traffic fell 9.3 percent last month following a year-on-year decline of 3.1 percent in April, a month traditionally buoyed by holiday travel over the Easter period.

Swine flu probably depressed air travel by about one percent globally in May, the first full month to feel the impact of the pandemic, IATA said.

However, the decline in air passenger traffic slowed in April and May compared to March, indicating "that a floor may now have been reached."

Nonetheless, average passenger loads per flight continued to decline as the industry failed to cut capacity as quickly as demand slumped, while air freight fell by 17.5 percent in May.

"Capacity is not aligned with demand. Passenger load factors dropped 3.3 percentage points over the last 12 months. The impact on revenue is dramatic," said Bisignani.

"After a 20 percent fall in international passenger revenue in the first quarter, we estimate that the drop accelerated to as much as minus 30 percent in May. This crisis is the worst we have ever seen.

"Airlines are in survival mode. Cutting costs and conserving cash are the priorities," the IATA chief added.

The biggest slumps in the airline industry's history until now were sparked by the September 11, 2001 attacks in the United States and the outbreak of the respiratory disease SARS in 2003, principally in Asia.

Earlier this month, Bisignani doubled his estimate of total airline losses for 2009 to about nine-billion dollars, on top of the $10.4-billion lost last year, despite a forecast decline in the industry's fuel bill.

The region experiencing the most trouble remained the Asia-Pacific market, where international passenger traffic fell 14.3 percent in May due to the weak economic climate "and the impact of influenza A(H1N1) on the region with the most vivid memories of the SARS crisis," IATA said.

Carriers in Mexico, where the swine flu outbreak emerged, suffered a 40 percent drop in demand last month. That helped depress cross border air travel in Latin America by 9.2 percent.

In North America, international travel fell 10.9 percent as Latin American routes suffered from the swine flu scare and transoceanic routes were dented by the recession.

Long haul flights also suffered in Europe, where major airlines lost market share to low cost carriers and IATA members reported a 9.4 percent decline in passenger demand in May.

The association, which does not include exclusively low-cost airlines such as Ryanair and EasyJet, said European budget carriers experienced traffic growth of 2.1 percent despite their revenue worries.

The decline eased in Africa to minus 6.1 percent, while Middle Eastern carriers bucked the global trend with 9.5 percent growth in demand and expanded capacity.

IATA groups some 230 carriers accounting for more than 90 percent of scheduled international air traffic.

AFP

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