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Air passenger demand ticks up 4.4pc in June

Geneva, July 28, 2011

Global traffic showed a slight softening in demand in June for both passenger and freight markets, with the passenger traffic rising 4.4 per cent while freight was 3 per cent lower, as compared to June 2010.

The trend for passenger travel remains upwards, but at a slower pace than the post recession rebound which was at an annual rate close to 10 per cent, according to the International Air Transport Association (Iata), which announced traffic results for June.

The slowdown reflects slower economic growth and increased costs resulting from higher jet fuel prices, and increased taxation (in some countries), it said.

Freight volumes have not grown since July-August 2010. May 2010 was the post-recession re-stocking peak, compared to which the June 2011 international freight market was 6 per cent smaller.  While world trade is expanding at 7 per cent a year, the benefit is being realized more by modes of transport other than air.

“Compared to May both passenger and cargo markets contracted by about 1 per cent. For passenger traffic, this is a speed-bump in a gradual post recession improvement. But air cargo continues in the doldrums at 6 per cent below the post-recession peak,” said Tony Tyler, Iata’s director general and CEO.

Overall demand for international passenger services grew by 5.9 per cent and capacity expanded by 7.2 per cent. While load factors were maintained at an impressive 79.0 per cent, this is 0.9 percentage points below the June 2010 performance.

Middle East carriers recorded a 6.4 per cent increase in demand against a capacity increase of 8.4 per cent for a load factor of 74.8 per cent. For the second consecutive month both demand and capacity increases by Middle East carriers have fallen behind those of Europe and Latin America.

African carriers continue to experience the weakest demand with a 2.9 per cent fall compared to June 2010 levels. The continued political unrest in North Africa is the primary driver of the poor performance which is also reflected in load factors which stood at 64.7 per cent, which is 3.9 percentage points below the previous year’s levels.

While North American carriers saw May’s 4.5 per cent demand growth fall to 2.4 per cent, Asia Pacific carriers saw demand grow by 3.3 per cent. Demand growth was held at about half the global average due to tightening economic policies and the effects of the earthquake and tsunami in Japan.

Latin American carriers experienced the highest growth levels with a 14.3 per cent increase over June 2010, while European carriers are showing the second most robust expansion of demand with 8.9 per cent growth compared to June 2010.

Brazil led domestic growth with a 15.1 per cent demand expansion over the previous year, propelled by strong growth in household incomes. Brazil was followed by India at 14.0 per cent. While China’s 5.0 per cent growth is also impressive, it is a step change from the 14.6 per cent recorded in 2010 and the 10.4 per cent recorded in May.
Freight

Carriers in the Middle East, Latin America and Africa showed year-on-year growth for June, recording demand increases of 3.7 per cent, 2.8 per cent and 0.3 per cent respectively.

Asia Pacific carriers, the biggest players in the air freight market with a 40.5 per cent market share, also recorded the largest year-on-year decline (-5.8 per cent).

European carriers posted a 1.3 per cent decline and North American carriers recorded a decline of 3.0 per cent compared to June 2010 levels.

“The industry is living in several different realities. With high load factors and an upward growth trend, the passenger business is doing better than cargo. But regional growth patterns are shifting,” said Tyler.

“The Middle East carriers have moderated to a single digit expansion and tighter economic conditions have slowed China’s growth. Meanwhile, Latin America is leading the industry expansion followed by Europe which is growing strongly despite its currency crisis. And North America is underperforming the industry on growth but leading on load factors.”

“What is clear is that the rising jet fuel price is putting pressure on the bottom line. The average price for the second quarter was $133/barrel which is an increase of $10 over the first quarter,” Tyler added.

“With an expected profit margin of only 0.7 per cent, the ability of airlines to recoup this cost is critical to staying in the black for the year. Slower economic growth makes these challenges all the more difficult. It is certainly not the time to burden the industry with increases in other costs, including taxation,” Tyler concluded.

Iata is forecasting an industry profit of $4 billion for 2011 which is a 78 per cent fall from the $18 billion that the airlines made in 2010.

On anticipated revenues of $598 billion, this translates to a net industry margin of 0.7 per cent. Based on a forecast average oil price of $110/barrel for 2011 and a jet fuel price of $126.5/barrel, the industry fuel bill is expected to be $176 billion which accounts for 30 per cent of costs. – TradeArabia News Service




Tags: Iata | Airlines | freight | Geneva | June | Passenger Demand |

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