Although major world stock markets may have recovered from their first quarter lows, it pays to remember they are based on expectations.
The real issue is whether these turning points are a false dawn, just a bounce, or a sign that the time between share price and real economic recovery is now measured in months rather than years - as in previous recessions. Irrespective, recent traffic figures show that aviation is still firmly in a downturn, with a real prospects of getting still worse, before it bumps along the bottom and begins to recover.
It is important to avoid the traps of statistical illusion:why use the term "negative growth"when activity is declining and the economy is contracting?
And when the economic tide swings to positive figures, no doubt the headlines will talk about "growth"when what we are seeing is recovery. A 20% fall needs 25% "growth"just to be back where it started.
IATA traffic data shows the decline is continuing at an apparently accelerating rate in most markets, but we are also now seeing yields and load factors falling together. Within this the passenger mix is continuing to deteriorate, with premium passengers down 21.1% in February - or by 17.5% adjusting for 2008's leap year - coming on top of a 16.7% fall in January. On a like-for-like basis, February premium traffic fell 19% on the North Atlantic, 23% in the Far East and almost 24% in Europe.
Managers have to face the difficulties of adjusting to the economic climate, but this is neither instant nor costless. Grounding aircraft is one thing, but taking out the associated costs is quite another. They also have to take a view on the recovery, in terms of the volume and value of traffic, and the consequences once the bottom has been reached. This will have a bearing on the industry landscape, which ought to be narrower - and potentially more profitable - than in the past.
July 2009 schedule data shows some capacity cuts. Intra-European seats offered will fall by just under 5%, Europe-North America is down by just under 7%, Europe-Asia by 7%, and intra-North America by almost 7%.
Conversely, Europe-Middle East seats are scheduled to increase by some 17%, whileMiddle East-Asia will be up 12%. Similarly intra-Asian capacity is slated to rise 3%, despite well-publicised reductions by the majors. Aircraft groundings, as well as order deferrals and cancellations continue to increase. Boeing is cutting 777 production rates, although the 737 family is as yet untouched.
Carriers are striving to keep pace with plummeting demand but, in some affected markets, capacity is increasing. No wonder it is now possible to fly business class between the UK and Australia, via a gulf hub, for under £2,000 ($2,955). Similarly there have been significant business fares cuts to South East Asia.The attempt by Singapore Airlines to charge a premium for its new business class appears to have been a short-lived experiment. We are already seeing "market exhaustion", with substitution between carriers and traffic redistribution, but no change in the need for cash.
Business travel budgets are a soft target when times get tough, resulting in fewer trips and travel policies which edge passengers ever-further down the aircraft.The results are evident, but without a reduction in new capacity the supply imbalance is likely to worsen and fare recovery during the upswing will be tough: good news for travellers but not for airlines. The recovery in the traffic mix, with passengers returning to former fare levels, is likely to lag.
As in many industries, consumers will get more for less; aviation is no exception. While the origins of the downturn are cyclical, many of the consequences will be structural.