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Europe's economic woes to hit airlines

Source: Reuters - Wed 16th Jun 2010

Government spending cuts and debt worries across Europe are set to weaken demand for premium air travel originating from the continent, the airlines body IATA said on Wednesday.

In a snapshot of premium air traffic, the International Air Transport Association described the disruption from Iceland's erupting volcano as a temporary blip in April, with demand showing signs of a rebound in May.

Overall, airline passenger numbers fell 5.9 percent year-on-year in April, with economy class demand hit harder than premium segments, which were up 1.1 percent because of continued strong demand outside of Europe.

"Provisional data for May suggests a strong rebound from the temporary disruptions of April" said IATA, which monitors cross-border traffic.

"There are risks ahead, particularly in Europe, but strong economic growth in other regions should continue to drive growth in business travel and both seat classes during the next few months" it said.

National spending cutbacks in Britain, Germany, Greece, Portugal and Spain, along with falling consumer confidence across Europe, were particularly worrisome for the European premium air market, it said.

"There are wider economic problems in Europe" IATA said. "As a result air travel originating from Europe is likely to remain relatively weak for some time."


The Geneva-based organisation, which has criticised the European air traffic authorities for lengthy closures of airspace following the Icelandic volcanic eruptions, estimated the disruption grounded 29 percent of global passenger capacity at its peak.

"All markets connected with Europe slumped sharply" said IATA, whose 230 carrier members include British Airways, Singapore Airlines and United Airlines.

Passenger numbers for flights within Europe fell 15.6 percent in April, while for flights across the North Atlantic they were down 12.7 percent. Between Europe and the Far East there was an 8 percent fall in passenger numbers, IATA said.

All of those markets had recorded growth in demand in the first quarter as a result of the recovering global economy.

"It appears as though the impact of the ash plume, substantial though it was in April, has only been a temporary interruption in the air travel upturn" IATA said.

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