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Economic recession

Reduction in European traffic was 2. 8 per cent for the full year 2001. The traffic downturn was significantly worse for business traffic compared to leisure traffic. British Airways reported a 22 per cent drop in economy-class passengers in October 2001 over the previous October, while premium-class traffic was down by 36 per cent. Traffic overall declined by 25 per cent. In November, total traffic was down 18 per cent, but premium traffic was still 25 per cent below previous year’s levels.

The European regional airlines were already suffering from the economic recession, with passengers down by 14 per cent for the period January to June 2001. The collapse of the United Kingdom regional carrier Gill Air occurred after 11 September, but the airline’s problems stemmed from before that date. Since 11 September, the regionals have the potential to enter new routes shed by the network carriers, but on the other hand they will be affected by reduced feed traffic through the major hub airports. An increase in Asia/Pacific traffic of 2. 0 per cent for the full year 2001.

Traffic figures have just been released by the Association of Asia Pacific Airlines (AAPA). raffic was significantly down for routes between the United States and both Asia and Latin America. However, it is predicted that the Asian region will not suffer nearly as badly as North America and Europe in the short to medium term. 5 SingaporeAirlines reported passenger-kilometre traffic down by 5. 4 per cent for September 2001, compared with the same month in 2000. The airline said that it could post a full-year loss, which would be the first since its establishment.

Japan Airlines saw passenger numbers on their routes to the United States fall by 50 per cent, with a decline in total traffic of 23 per cent. Philippine Airlines, Thai Airways and Garuda all reported positive growth rates for September 2001, while Cathay Pacific, China Airlines and Korean Air all suffered a fall in traffic of between 14 and 17 per cent. In the Middle East, Gulf Air reported only a 6 per cent decline in September traffic over the previous year, but during the first two weeks of October traffic was down 20. 4 per cent in terms of passengers and 25.6 per cent in terms of passenger-kilometres, implying that long-haul traffic was worst hit.

Saudi Arabian Airlines experienced a 50 per cent decline in bookings on flights to the United States since 11 September, and European bookings were down 30 per cent compared to the same period in 2000. The impact of 11 September in terms of airline capacity is best represented by available seat-kilometres. This measure captures both seats offered and distance travelled, and allows comparisons to be made across routes. Interregional routes most affected were those between Europe and Central Asia.

This was because of the fighting in Afghanistan, but the weight of this capacity in the world total was very small. Both transatlantic and transpacific routes were hardest hit, with around 15 per cent fewer seats in November 2001. On the North Atlantic, airlines with the largest reductions in capacity were the US carriers, with Continental down by 22 per cent, American Airlines by 20 per cent and Delta by 19 per cent. On the other hand, Northwest (with close ties to European carrier KLM) planned to reduce seat-kilometres by 8 per cent and Lufthansa only by 5 per cent.

Capacity on the routes from Europe to North-east Asia has changed little, while carriers have switched capacity from transpacific and transatlantic routes to those linking Europe and South-East Asia, on which capacity is up by 9. 4 per cent. AEA member airlines, on the other hand, reported that capacity to Asia and Australasia was down by 8 per cent in October 2001 compared to the same month of 2000. AEA carriers also reduced capacity on routes to and from the Middle East and North Africa, with a 13 per cent drop in October 2001 compared to October 2000.

It is a general opinion amongst airlines and their representative bodies that the attacks were targeted at government policies rather than at the air transport industry. Therefore, governments must respond appropriately as long as market conditions cannot be restored to normality. Although some carriers require specific government support, others believe that government response should aim to offer solutions to meet the common problems encountered by all different air operators. The events of September 11, 2001 resulted in a crisis for the airline industry as a whole, both in the U. S. and worldwide.

Because of this crisis, governments around the world have worked to “bail-out” their airline industries. In the U. S. an initial $15 billion package was supplied to help airlines survive the crisis. It is unclear whether that will be enough. One month after the crisis began, United Airlines’ Chairman and CEO James Goodwin said, “Today, we are literally hemorrhaging money. Clearly this bleeding has to be stopped – and soon – or United will perish sometime next year” (BBC, October 11, 2001). United Airlines filed for Chapter 11 bankruptcy on December 9, 2002.

Furthermore, Swissair, Ansett Australia, Vanguard (U. S.), and Sabena Airlines of Belgium all claim that 9/11 is largely to blame for their demise. Indeed, 9/11 created even more tragedy than the immediate loss of life and property. More than two years have passed since the event, and the airline industry has still not recovered. 5 Airline Business, Nov. 2001 The Association of Asia Pacific Airlines (AAPA) has called on the region’s national governments to aid the industry in its attempt to recover from the current crises by providing relief from landing fees, terminal charges and taxes. It has also asked governments to help by promoting tourism and facilitating international air travel.

Low-cost airlines such as Ryanair believe that the European Commission and European governments should firmly resist any calls for state aid. If either really want to assist the airline industry in the aftermath of 11 September, the focus should be on measures that reduce airline costs (such as the air passenger duty in the United Kingdom, or airport and landing charges at many government-owned airports). Such measures will result in an immediate reduction in costs and air fares, which will in turn stimulate air travel, and help to limit the impact of any economic downturn on the economies of Europe.

Charter operators have also asked to be included in any government compensation to scheduled airlines. The charter airline trade association, the International Air Carrier Association (IACA), has stated that while it is not advocating state subsidy, it believes that governments should provide financial assistance to compensate for additional costs incurred by the industry as a consequence of 11 September. Some governments of tourist destinations are offering support to charter airlines serving their countries.