11 June 2009

1 Swallow? Try 5 - Assessment of ARC 2009 Year to Date

So we now have 5 full months under our belt and the variances shown from the extra day in 2008 and the differences in Easter now all mitigated, what can we see from the ARC data.

Well we see that the transaction numbers have been slowly improving. But where the big hole exists - its in yield. This bodes badly for the rest of the year for the airlines.

Transactions improved to only being down 8.4% BUT the sales totals are off just under 30%. That means that the airlines must be heavily discounting to maintain revenues. With commissions creeping back into the Airlines and agencies lexicon - something has to be done to improve yield. The airlines don't have the bounce of a strong book of revenue to fall back on either. this puts the airlines into that nastiest of all quandaries. Whether to discount further to capture just about any cash that's out there or to start investing in smart distribution arrangements to boost traffic and reduce COGS.

The drop in sales tracks directly with the drop in commercial traffic. We estimate across the board as a generalization that the market is off 15%. Stories coming from BA, LH and premier GCC and Asian carriers indicate that premium traffic is just off by 30%. No amount of 2 for 1's are going to improve this yield. Further the corporate wallets are going to stay shut for at least through the summer months. Even the last 2 quarters of 2009 are not going to look that much better as the Corporate traveler adjusts to the lack of approved spending.

Chaps we are not anywhere near the bottom yet.


No comments: