Global aviation demand slows
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Global demand for air travel increased 4.5% year-on-year in August 2011, according to the latest data from IATA, representing a significant slowdown from the 6.0% growth recorded in July. While still registering annualised growth, the decline in passenger demand from July to August 2011 is notable, with traffic dropping 1.6% month-on-month. International markets declined by 1.8%, while already weak domestic markets shrank by 1.0%. Passenger load factors remained high at 81.4%, but still registered a 1.3% decline compared to July.
“The industry has shifted gears downward. The pace of growth in passenger markets has dipped and the freight business is now shrinking at a faster pace. With business and consumer confidence continuing to slump globally there is not a lot of optimism for improved conditions any time soon,” said Tony Tyler, IATA’s Director General & CEO.
International passenger demand was up 6.2% in August compared to the previous year. When compared to July however, demand contracted by 1.8%. Asia Pacific carriers reported 5.3% demand growth for August, slightly below a 5.6% capacity expansion. This is slightly better than the year-to-date growth of 4.4%, reflecting the recovery in Japanese international travel. Load factors of 78.9% were below the industry average of 81.2%.
European airlines achieved the strongest growth in international passenger traffic in August with a 7.9% increase, just slightly below a capacity expansion of 8.2%. Although domestic economies and leisure travel are weak, strong exports have led to increased business travel on international markets. Load factors of 83.9% were at historically high levels. While the August growth was the strongest in the industry, IATA noted that this is below the 10.6% demand expansion reported for the first eight months of the year indicating that markets are softening.
Middle Eastern carriers recorded the second highest demand growth at 6.7%, behind capacity expansion of 7.6%, leaving load factors down at 76.2%. North American carriers reported the weakest performance with growth of just 2.9%, which was partly a result of equally slow growth in capacity. This is a sharp downturn from stronger growth earlier in the year, as reflected in the 5.6% year-to-date demand expansion. The region’s carriers posted the highest load factor at 86.1%.
Latin American carriers reported 5.6% growth for August, behind their 7.1% capacity expansion. This is well below the 10.9% demand growth recorded over the first eight months of the year. Load factors stood at 76.9%. Finally African carriers reported 5.2% demand growth against a capacity expansion of 6.3%. The continent’s carriers had the lowest load factor at 70.0%.
In terms of domestic traffic, demand in August shrank by 1.0% compared to July, which brought the annualised August 2011 growth rate down to 1.5%. The largest source of weakness in absolute terms was the 0.3% fall in the US compared to the previous year. US domestic travel accounts for about half of all domestic travel.
Japanese domestic demand was down 12.4% compared to the previous August, but traffic has now recovered to within 9% of pre-earthquake and tsunami levels. Chinese domestic travel demand was up only 2.8% on the previous August. While positive, it is well below the double-digit growth seen in 2009 and for much of 2010. India recorded demand growth of 19.7%, the top performer among domestic markets.
IATA stated that August’s traffic results are in line with expectations for a decline in profitability heading into 2012. Airlines are expected to see total industry profits fall from US$6.9 billion in 2011 to US$4.9 billion. Historically, the airline industry has delivered collective losses when GDP growth (measured using current exchange rates) falls below 2.0%. GDP growth has fallen from 3.9% in 2010, to an expected 2.5% this year and 2.4% is projected for 2012.
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