IATA Report: The Impact of September 11 2001 on Aviation

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Foreward

On September 11, 2001 anyone associated with

aviation knew that the industry would never be the

same.

What we did not know was how resilient the

industry would be in the aftermath of the tragedy or

the direction in which it would change.

A decade after the event, there can be no doubt about

aviation’s resilience. By 2004 revenues and traffic

surpassed 2000 levels.

And by 2006 aviation had

returned to profitability—albeit with a weak 1.1% margin. In the interim airlines dealt with SARS, additional terrorist

attempts, wars, and rising oil prices.

It took three years to recover the $22 billion revenue drop

(6%) between 2000 and 2001. When the global financial

crisis struck in 2008, 2009 revenues fell by 14% ($82

billion) to $482 billion. This was largely recovered in

the following year when industry revenues rose to $554

billion and airlines posted an $18 billion profit. Clearly the

restructuring of the decade has left airlines leaner and more

resilient in the face of crisis.

Over the decade, the dimensions of global aviation have

also changed. IATA expects 2011 airline revenues of $598

billion—nearly twice the $307 billion of 2001. Airlines are

also expected to carry 2.8 billion passengers and 48 million

tonnes of cargo. That’s a billion more people flying and 16

million more tonnes of cargo than in 2001.

While it is difficult to isolate the impact of the events of

2001, we can say that they were a part of a chain of events

that cost the industry three years of growth. The 2008

global financial crisis cost another two years of growth.

The legacy of 9.11 is felt most in airport security. Aviation is

more secure today than in 2001. But this has come at a great

price in terms of passenger convenience and industry costs.

As we move forward, there are five major lessons in security

over the last decade:

Governments must coordinate the development and

deployment of security measures to ensure harmonized

global standards and eliminate overlapping and

redundant requirements among nations.

Governments are obliged to foot the bill for security

threats which are national challenges in the same

manner as they would do in any other sector. Airlines

and their passengers currently pay a security bill that

had ballooned to $7.4 billion by 2010.

Passengers should and do play an important role in

helping keep air travel safe. Vigilance and cooperation

with authorities are crucial.

Governments need to embrace a risk-based approach

to security screening.

We must accept that there is no such thing as 100%

risk-free security. Governments must focus on the

probable and not all that is possible and avoid policies

driven by knee-jerk reactions.

A good place to start is by removing the hassle that comes

between check-in and boarding at many airports. The

building blocks to do a better job exist. The vision for IATA’s

Checkpoint of the Future is for passengers to be able to get

from curb to gate in a seamless and convenient process. For

this, we need a risk-based approach to security powered by

the enormous amount of data that we can and do collect on

travelers. Combined with this will be technology that will allow

most passengers to simply stroll through a checkpoint that

can detect metal and harmful substances without stopping,

stripping or unpacking.

Parts of this vision could be realized with technology that

exists today. Others are in development with a three to

seven year horizon. The important thing is to keep focused

on evolving the 40-year-old concept of today’s airport

checkpoint into one that is more convenient, more effective

and that can handle the ever increasing volume of people

who want and need to fly.

Finally, as we commemorate the tragedy of 9.11, the

thoughts and prayers of the industry are with the families

of the victims—passengers, crew and bystanders. Our best

tribute to their memories is a resilient aviation industry.

Aviation is a force for good and an instrument of peace that

promotes trade, spreads wealth and facilitates understanding

among the peoples and cultures of our world.

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The Financial Impact of 9.11

9.11 was the beginning of the most challenging decade in

aviation history. But it is important to note that the industry

was already in a weak financial position. World trade had

slowed and the ‘dot.com bubble’ had burst the year earlier.

Global airline profits had fallen from $8.5 billion in 1999 to

$3.7 billion in 2000.

US Impact

• Air Space Closed: On September 10, 2001, US

airports handled 38,047 flights. On September 12,

they handled 252 commercial flights. One week later

(September 18) there were 34,743 flights.1

• Passenger Traffic: US passenger traffic, measured

by revenue passenger kilometers (number of travelers

multiplied by the distance traveled) declined 5.9%

in 20012 (compared to 2000) and a further 1.4%

in 2002. Airlines struggled to match this decline by

cutting capacity (available seat kilometers or number

of seats multiplied by distance traveled) by 2.8% in

2001 and a further 3.9% in 2002. This was the first

time since World War II that industry capacity declined

for two consecutive years. After stabilizing in 2003,

capacity growth resumed in 2004 and continued

until 2008, when it declined again owing to soaring

oil prices and the global financial crisis. Capacity

fell further in 2009, returning virtually to 2000 levels.

Between 2000 and 2009, the US commercial aircraft

fleet shrank by around 700 units.

• Domestic Market: “The events of 9.11…marked

a permanent decline in [US] domestic airline

demand”—Barclays Capital, February 2009. Total

domestic operating revenue per $100 of nominal US

GDP declined from around US$0.823 in 2000 to

US$0.687 in 2010, representing a shortfall of $18

billion for 2010 and $142 billion for the 2001-2010

period.3 Passengers found alternatives to short-haul

travel to avoid the security hassles at airports. Network

carriers shed their domestic operations to regional

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Global Impact

Traffic: Global passenger traffic (tonne kilometers

performed) declined by 2.7% in 2001 (see table

below). Traffic did not surpass the 2000 level until

2003. It continued to rise until 2009 when, owing to

the global financial crisis, it declined 2.1% year-onyear.

• Revenues: Global airline revenues declined from

$329 billion in 2000 to $307 billion in 2001 and

further to $306 billion in 2002. Revenues rebounded

to $322 billion in 2003 and then to $379 billion in

2004. The next revenue dip was in 2009 when they

fell $82 billion to $482 billion. In percentage terms

this 14% drop was more than twice the decline

experienced in 2001-2.

• Profitability: Airlines lost $13 billion in 2001 and a

further $11.3 billion in 2002.The industry recorded

its first post-September 11 annual profit in 2006

($5 billion), and earned $14.7 billion in 2007. The

following year rising oil prices and the global financial

crisis plunged airlines back into the red with 2008-9

total losses of $25.9 billion.

• Bankruptcies: Within months of the attacks, Swissair

and Sabena went bankrupt as the 9.11 shock pushed

these financially weak carriers into collapse.

• Oil price: In the decade since 9.11 the industry fuel

bill rose from 13% of costs (2001) to 30% (projected

for 2011).