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July 01, 2010

Air travel worldwide finally returned to pre-recession levels in May, driven by an 11.7 percent increase in passenger traffic from a year earlier, an industry group said Tuesday.

The International Air Transport Association said May traffic was up 1 percent from pre-recession levels, the first time it has shown such an increase since the world's economic downturn hit the airline industry hard nearly two years ago.

Beginning in September 2008, the industry had 13 consecutive months of year-over-year declines in traffic, hitting bottom with a 10.1 percent drop in February 2009 and an 11.1 percent drop in March 2009.

But as the global economic picture began improving in the second half of 2009, passenger traffic has increased every month except one since October.

The exception was this April, when ash clouds from an Icelandic volcano caused widespread cancellations and disruptions in Europe and across the North Atlantic. May's 11.7 percent jump in year-over-year traffic was the industry's largest monthly percentage increase since March 2005.

The association said North American carriers reported a 10.9 percent increase in passenger traffic, that region's biggest increase since May 2005. The region's carriers filled 82.4 percent of their seats with passengers in May, the highest load factor of all global regions.

On June 7, the association projected that airlines would earn $2.5 billion in 2010 profits, up from a $9.9 billion loss last year. As recently as March, the aviation trade group had been predicting a $2.8 billion industry loss.

"This is good news, but it is only a 0.5 percent [profit] margin. We are still a long way from sustainable profitability," the trade group's director general and chief executive, Giovanni Bisignani, said Tuesday.

With most airlines scheduled to report earnings in July, analysts' consensus is that all major U.S. carriers will be profitable in the second quarter, which ends today.

American Airlines Inc. parent AMR Corp. had been expected to post a second-quarter loss. But consensus this month has swung to a profit for AMR, too, as a sharp increase in unit revenue has improved its financial picture.

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