"The combination of rising non-fuel costs and a significant deterioration in passenger revenue in the first quarter proved too great to offset the year-over-year plunge in fuel prices," said John Heimlichchief economist for the US-based Air Transport Association (ATA). "Consequently, airlines remain focused on seeking every feasible opportunity to realize cost savings and generate new streams of revenue."
The 10 largest US carriers lost a combined $1.86 billion in the first quarter, according to Air Transport World calculations. ATA's Airline Cost Index fell 22% for the period. The ATA index is not limited to those 10 airlines and does not include unit cost measurement, according to Air Transport World. It calcualtes unit cost fell 8% to 10.67 cents and cost per available seat mile (CASM) excluding fuel was up 4.7% to 7.87 cents.
The composite cost index, which includes all operating and interest expenses, fell 22% year-over-year to 176.9, "easily outpacing" the 0.2% fall in the US Consumer Price Index, ATA reported. Labor costs surpassed fuel as the average price of the latter dropped 36.1% while the employment of a fulltime-equivalent employee rose 5.6% year-over-year. The gap between average breakeven load factor and actual load factor fell to 4.6 points from 6.1 points. Landing fees rose 7.7% while most other cost centers declined.
Meanwhile, the Association of European Airlines (AEA) said air cargo demand continues to decline at a "catastrophic" rate while passenger traffic registered its "worst result" of the economic downturn in May. AEA said that its member carriers "have seen their cargo volumes cut by one-third or more" and in May posted a year-over-year airfreight traffic decline of 19.8%.
On the passenger side, traffic was down 8.3% year-over-year in May, the poorest monthly showing of the downturn "after making allowance for Easter variations which artificially depressed the March figure." European carriers' Far East traffic was off 9.8% while carriers saw an 8.8% plunge on North Atlantic traffic. Passenger traffic within Europe was 7.9% lower for the month. AEA noted that its 28 members collectively reduced passenger capacity 5.3% year-over-year in May, with all but three operating with less capacity compared to May 2008. Load factor dipped 2.4 points year-over-year to 73.2%
