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Wall Street fallout in the skies and elsewhere

Travel MONITOR

Wall Street fallout in the skies and elsewhere

IMTIAZ MUQBIL

The global travel and is bracing for yet another crisis as the fallout from the financial makes itself felt.

In the US, both the Travel Industry Association (TIA) and the (ATA) last week urged Congress and the Bush administration to take action to shore up .

“The small and medium-sized businesses that make up the vast majority of America’s $1.6-trillion travel economy, which employs one out of every eight American workers, depend on ready access to credit to meet their daily operating needs and to grow their companies,” the TIA said.

“The longer this uncertainty is left unresolved, the greater the potential negative economic impact for workers, employers and all American taxpayers.”

James May, the ATA president and CEO, added: “We strongly support Congress acting in a bipartisan manner, passing comprehensive, balanced legislation. The consequences of inaction are unacceptable.”

The (IATA) released international traffic data for August that confirmed a continuing downturn, with September expected to be worse.

International passenger demand growth slowed to 1.3% in August, following disappointing growth of 1.9% in July. Passenger load factors fell to 79.2% from 81% a year earlier as capacity growth outpaced demand.

“Passenger traffic grew by 5.4% in the first half of the year. That slowed to 1.9% in July and 1.3% in August. The contrast between the first half of the year and the last two months is stark,” said Giovanni Bisignani, IATA’s director-general and CEO.

“The slowdown has been so sudden that airlines can’t adjust capacity quickly enough. While the drop in the is welcome relief on the cost side, fuel remains 30% higher than a year ago. And with traffic growth continuing to decline, the industry is still heading for a $5.2-billion loss this year.”

Air freight is also declining steadily, led by Asia Pacific carriers that posted a 6.5% decline in July and a 6.8% decline in August.

“Airlines carry 35% by value of the goods traded internationally. The three-month decline - led by weakness in Asia-Pacific markets - is a clear indication that global trade is slowing down. This shows that the impact of the financial crisis is broad geographically and will worsen before it gets better,” said Mr Bisignani.

Asia Pacific carriers reported a 3.1% contraction in passenger demand, following a 0.5% decline in July. The Olympics in China and a weakening Japanese economic outlook also contributed to the decline.

“The industry crisis is deepening and no region is immune. Urgent measures are needed. From taxation to charges and operational efficiencies, all areas affecting the business must be examined for ways to reduce costs and drive efficiencies. It’s a matter of survival,” said Mr Bisignani.

The International Congress and Convention Association (ICCA) seemed to have a more mixed perception of the scenario.

A survey of its global membership in the light of the turmoil in financial markets generated a response from more than a quarter of its 850 member companies and organisations of how the meetings industry is coping.

Fewer than 6% of respondents reported suffering a significant downturn as a result of the economic environment, while 60% reported no impact. However, ICCA members are more negative about the prospects for the rest of the year.

Only 12% of respondents are planning to cut their marketing budgets during the rest of 2008, while more than three-quarters indicate that they will definitely not be making cuts. The ICCA said this was good news for trade show organisers, and was in marked contrast to the big cuts that were seen in previous economic downturns.

Asked what impact the financial crisis would have on the meetings industry in general, only 6% felt there would be no significant impact at all.

Just over half felt there would be significant negative impact but restricted to certain regions, more than one third felt there would be significant short-term global impact, while 7% felt there is likely to be significant global impact lasting longer than 18 months.

ICCA CEO Martin Sirk was quoted as saying: “It would seem that optimism about personal business performance is balanced by a far more pessimistic perception of how others in the industry are likely to be affected. There is still a great deal of uncertainty in the marketplace, but it is clear that the financial turmoil has not yet been translated into any noticeable cutbacks amongst clients.

“This reinforces other anecdotal feedback … from meeting planners which indicates that international meetings are becoming ever more important to companies and associations alike, and they are more reluctant to cut events that have become ‘mission critical’ to achieve their business objectives. If this is so, it will help our industry to weather any future economic downturn.”

Imtiaz Muqbil is executive editor of Travel Impact Newswire, an e-mailed feature and analysis service focusing on the Asia-Pacific travel industry.

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This entry was posted on Monday, October 6th, 2008 at Monday, October 6, 2008 and is filed under Business News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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