From Air4casts online...... (Edmonton is doing pretty well considering)
WAITING FOR SOMETHING TO TURN UP
Traffic Drops 5.7% in September
Are We All Micawbers Now?
The mind-set of waiting for something to turn up has been reinforced by aviation and travel retail business support for the notion that 2010 will see passenger numbers recover. There are currently at least two strands of conventional wisdom in circulation of which Micawberism is potentially the most injurious to stockholders.
WATING FOR THE UPTURN; THE MICAWBER CASE
In 2008 air travel demand has been the harbinger of recession. US emplanements dipped in the second quarter but only in the Quarter which ended 30 September is GDP expected to show negative growth and that negative may in itself be fearsome. Those looking for guidance from the experience of the last recession in 1991 will know that the opposite was the case. GDP stagnated in the third quarter and went into the red in the fourth with a sharp 3% reduction. In the same quarter passenger numbers fell. But while negative GDP was quick to rebound, it took passenger numbers another nine months to get back into the black. The US experience is explained here.
Those Micawbers, looking for demand to turn up, might need first to consider the timing of the low-point and its depth. They would then need to reflect on the lag from economic recovery to air travel recovery. There is little evidence or experience to help because the recession beginning now has different causes and is displaying different characteristics. There is certainly an association between GDP growth and the demand for air travel. What there is not is a predictive relationship which allows a GDP input to produce a pax output.
The latest IMF forecast lends feeble support to the 2010 recovery case. In its October review it expects a gradual recovery to get under way "...later in 2009, but global growth is not expected to return to trend until 2010." But the IMF is less than transparent. It does not quantify its 2010 thinking except in the case of the UK. For the UK it envisages a full recovery to 2.2% growth by 2010. but explains that the risks around this forecast "are to the downside". Plotting a course between the hysteria of markets and the panacea of forecasting only the acceptable must imply a certain scepticism about both. It may then be prudent substantially to discount the probability of a strong enough upturn in 2010 to fire an air travel recovery.
IT'S NOT TOO BAD REALLY
Is a sensible counter-balance to the to the strident coverage of world affairs post-Lehmann. It neglects the fact, however, that "not to bad" when translated into fixed cost under-recoveries is very bad. It is also not quite true.
The Most Recent Data
Airports representing almost a quarter of world traffic for the month are reporting a total traffic decline of 5.7% against an expected positive of 0.1%. Get the full picture here from a bookmarkable page:
There are still airports demonstrating positive growth, but so far this month they represent only a quarter of declaring airports. The proportion in double digits in September is less than ten percentage points.
London Heathrow; LHR UK
Passenger numbers for the month are down by -3.8%.
Frankfurt; FRA Germany
Passenger numbers for the month are down by -3.9%.
Madrid Barajas; MAD Spain
Latest report shows passengers down by -9.8%.
London Gatwick; LGW UK
Latest report shows passengers down by -6.8%.
Munich; MUC Germany
Declares an increase in passenger numbers of 0.6%.
Singapore; SIN Singapore
Just reported: passenger numbers drop by -0.4%.
Palma; PMI Spain
Just reported: passenger numbers drop by -6.3%.
Barcelona; BCN Spain
Just reported: passenger numbers drop by -14%.
Minneapolis; MSP USA
Passenger numbers for the month are down by -14.3%.
Seoul Incheon; ICN South Korea
Latest report shows passengers down by -13%.
Manchester; MAN UK
Just reported: passenger numbers drop by -7%.
London Stansted; STN UK
Passenger numbers for the month are down by -4.7%.
Zurich; ZRH Switzerland
Reports a passenger increase of 3.9%.
Copenhagen; CPH Denmark
Latest report shows passengers down by -1%.
Vienna; VIE Austria
Passenger flows rise by 1.2%.
Oslo; OSL Norway
Passenger numbers for the month are down by -1.3%.
Arlanda; ARN Sweden
Passenger numbers for the month are down by -1.9%.
Taipei; TPE Taiwan
Latest report shows passengers down by -15.1%.
Moscow Shermetyevo; SVO Russia
Passengers up by 8.2%.
Malaga; AGP Spain
Just reported: passenger numbers drop by -10.9%.
The Last Quarter 2008 Forecast
Air4casts is now projecting an absolute 0.6% decline in world passenger numbers for the last quarter of this year. At the previous forecast point the outlook for the last three months was slightly more positive at 0.7%. Internationally the three months should see a rise of 1.7% but with the strong probability of decline in Asia/Pacific. The European international projection is down a full percentage point forecast to forecast.
The 2009 Forecast
It remains positive with a 0.9% rise in total passenger numbers. Internationals are set to increase by 2.2% and in the first quarter they should be up by 2.3%, Domestic growth risks tipping into the negative and all of this is before any account is taken of the September actuals. The forecast model is set to rerun again in ten days with the likelihood of further growth reductions becoming necessary.
The Transatlantic Market in September
Passenger numbers between London and the USA dropped by 6.2% in September. From Heathrow to JFK the decline for the month was almost ten percentage points and September was the fourth month in a row to show a decline.
AFTER THE PANIC; BACK TO BUSINESS AS USUAL?
The argument acknowledges that banking chaos will "spill over into the real economy". It accepts, grudgingly, that this will touch the number of passengers who fly. The New York broker who recently predicted whopping 2009 profits for airlines on the basis that passenger numbers will hardly drop at all while oil prices have plunged provides an example. The argument also assumes that the easing of inflationary pressures will release discretionary spending.
Longer term there is a strand to the argument which appeals. It is that since workaday living conditions in industrialized are already unpleasant and will become more so in a recession, the population will always seek a vacation escape route thus supporting travel sales. The argument neglects two large unknowns both of which ask whether something more fundamental than the structure of the banking sector has changed. Firstly, what will be the shock effect on consumers of financial uncertainty? Without doubt there will be what Keynes called a move to liquidity preference and short term that is all a part of recession; people will hang on to their money. Secondly, how will changing property values affect consumption? There is a Harvard Business School view that US real estate values are still out of line with incomes and are therefore set to fall substantially. That same mismatch exists in several European countries and especially in those which have inadvertently imported that especially pernicious anglo-saxon foolishness that a house is to be lived off, not in. It is also prevalent in the Emirates. A structural change in the property sector has the potential to cause more damage than any other single factor.
It's Domestic Not International
In the USA that is undeniably the case but this is a European focused argument, which reasons that the root problem lies in consumer disaffection with domestic air travel and especially so from the major hubs. Domestic travel in the region represents one third of the total and the six largest hubs account for 20% of domestic. Until this year they have been growing, albeit at a much lower rate than their smaller competitors. This year their passenger throughput will drop; but in the context of total regional traffic the number is an insignificant 850 thousand fewer seats sold.
__________________
"Hey, Lama, hey, how about a little something, you know, for the effort, you know." And he says, "Oh, uh, there won't be any money, but when you die, on your deathbed, you will receive total consciousness." So I got that goin' for me, which is nice. Carl Spackler, 1980
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