Revenue for the nation's passenger air transport and air freight volumes declined through most of 2009 and early 2010, contracting the market for the United States air transportation industry and causing many carriers to cut operational costs down to minimum levels. However, reports show that air transport has begun to recover in recent months, making steady gains in passenger traffic and cargo volumes through March. But will the recent shutdown in European air traffic due to volcanic ash problems hinder the nascent industry rebound?

According to a late-April report from the Air Transport Association of America (ATA), revenue from U.S. passenger air service rose 15.4 percent in March versus the same period in 2009 and marked the third consecutive month of revenue growth. Passenger rates increased roughly 1.4 percent in March, while the average price to fly climbed 11.7 percent. In international markets, U.S. carrier growth was "robust" across all regions, with passenger revenues rising 19.6 percent.

There have been similar gains in cargo traffic revenue, which increased 14 percent year-over-year in February (as measured in cargo revenue ton miles). The ATA attributes much of the growth in cargo returns to international trade, as revenue climbed 4 percent domestically and 23 percent internationally in February. March cargo data is not yet available.

"With the global economy continuing to heal, spending on air travel in international markets led the way in March," according to ATA President and CEO James C. May. "However, we expect that the recent shutdown of European airspace due to volcanic activity will negatively impact April results."

According to the ATA, U.S. airlines operate roughly 26,000 daily flights in 80 countries, with more than 6,000 vehicles carrying an average of 2 million passengers and 50,000 tons of cargo per day.

An April report from the International Air Transport Association (IATA) found that international passenger demand was up 10.3 percent year-over-year in March, up from 9 percent in February, while cargo transport demand increased 28.1 percent, up from 26.3 percent in February.

Efforts to improve transport capacity levels led to a record-high 78-percent passenger load factor in March, according to the IATA. International freight load capacity rose to 57.1 percent in March, its highest level since November 2002, due to tighter demand and supply conditions.

"March results show that the pace of the upturn is strong. But the trauma of the recession is not over. The industry has lost two years' of growth, and passenger and freight markets are still 1 percent below early-2008 highs," Giovanni Bisignani, director general and CEO of the IATA, said of the findings. "Nonetheless, the pace of improvement, based on an improving global economic situation, is much faster than anybody would have expected even six months ago."

Despite positive growth data, volcano-related concerns are widespread in the air transport industry. Ash resulting from the sudden eruption of a volcano in Iceland last month caused a large-scale shutdown in European aviation activity, and this is expected to drive down April revenue figures.

According to a volcano crisis report from the IATA, six days of volcano-related disruptions cost airlines worldwide approximately $1.7 billion, with lost revenues peaking at $400 million per day during the most severe three-day period. Approximately 100,000 European flights were canceled.

"At the worst, the crisis impacted 29 percent of global aviation and affected 1.2 million passengers a day," according to Bisignani. "The scale of the crisis eclipsed 9/11 when U.S, airspace was closed for three days.

"It is hitting hardest where the carriers are in the most difficult financial situation," he added. "Europe's carriers were already expected to lose $2.2 billion this year — the largest in the industry."

Despite the global effect of the air transport shutdowns, U.S. air companies are performing surprisingly well in the face of the crisis.

"The disruption has created uncertainly for customers, but analysts say U.S. airlines won't face as many costs as you might think," NPR reports. "The economic impact on U.S. airlines will not be nearly as bad as the effect on European carriers that have been virtually shut down."

Part of the reason for the limited impact on U.S. air transport firms is that they currently have leaner operations than in earlier years and will shift much of the delayed volume to maximize capacity on other flights. Additionally, lost revenue will be partially offset by lowered fuel expenses, as aircraft do not consume costly fuel while grounded.

According to the Washington Post, analysts estimate the U.S. air transportation industry may lose up to $100 million due to volcanic ash disruptions, however, "U.S. airlines will fare better because they have stronger domestic networks and have many international flights outside of Europe."

An ATA impact report found that during the ash-cloud crisis, U.S. firms canceled roughly 1,600 flights over the course of seven days before resuming normal operations.

Earlier:

Air Freight Industry Slowly Rebounding

Disaster Planning: Prevention vs. Response

Resources

ATA Reports Double-Digit Increase in March Passenger Revenue, February Cargo Traffic
The Air Transport Association of America, April 21, 2010

Demand Improvements Continue in March — Expect Volcano-Related Dip in April
The International Air Transport Association, April 28, 2010

Volcano Crisis Cost Airlines $1.7 Billion in Revenue...
The International Air Transport Association, April 21, 2010

Impact of Icelandic Volcanic Eruption on U.S. Carriers
The Air Transport Association of American, April 22, 2010

U.S. Airlines See Major Disruption, Some Losses
by Kathy Lohr
NPR, April 21, 2010

Iceland Volcano Crisis Will Hit European Airlines Worse than U.S., Experts Say
by Sholnn Freeman
The Washington Post, April 22, 2010