Air traffic growth continues to slow
Demand for air travel in June expanded by 6.2% year-on-year. Capacity was expanded just 4.5% however, pushing load factors up at 81%. IATA noted that while this appears to be a healthy growth rate, the growth trend since early 2012 has seen a slowdown. This is illustrated by isolating the February through June trend which shows 2% annualised growth. That is a major slowdown from the 8% growth rate experienced from mid-2011 through to January 2012.
“The uncertainty that we see in the global economic situation is being reflected in air transport’s performance. Although there are some pockets of solid performance, it is difficult to detect a strong trend—positive or negative—at the global level. Passenger markets have been growing more slowly since the beginning of the year and freight markets gains have been mostly very weak. The net effect is a demand limbo as consumers and businesses hedge their spending while awaiting clarity on the European economic front,” said Tony Tyler, IATA’s Director General & CEO.
Demand for international flights was up 7.4% in June, although the growth trend shows little promise. While passenger markets experienced strong growth through to the end of 2011, this has slowed continuously in 2012. For example, from May to June 2012 demand was up just 0.2%. When looked at over the second quarter of 2012, international air travel has increased just over 2%.
European airlines experienced strong growth in June (7.3%), well ahead of the May result (4.3%). Given the continuing economic uncertainty in Europe, IATA said the strong June performance is likely to be the result of “volatility in weak market conditions”. The previous few months had seen the growth trend flatten out, after a solid 6% annualised growth rate from mid-2011 to the first quarter of 2012. Capacity was up 4.9% and load factors stood at a healthy 82.5%.
North American airlines saw just 1.6% growth in demand in June, while capacity was cut by 0.3% compared to the previous June. This pushed the load factor to 86.9% – the highest among the regions. Compared to May there was basically no growth with the region’s airlines reporting a 0.1% decline in demand.
Asia Pacific carriers reported 6.0% growth in demand which was more than double the 2.9% expansion in capacity for June. The load factor for the region’s carriers stood at 79.5%. Month-to-month, demand in the region was basically flat at -0.1%. The Asian growth trend for the region is similar to that of the overall market. From mid-2011 to the start of 2012, Asia Pacific carriers experienced a 9.5% annualised growth in demand. That has slowed to 2% for the February to June period.
Middle Eastern carriers were the strongest performers with demand growth of 18.2% outstripping a capacity expansion of 13.4%. Load factors stood at 78.6%. In contrast to the overall market, the growth trend in this region has been robust throughout 2012, gaining a further 1.9% in June compared to May.
Latin American airlines also performed well in June, recording an 11.2% gain in demand compared to the previous year. Demand growth slightly outpaced a capacity expansion of 10.7%, but load factors were among the weakest at 77.4%. Finally African carriers showed growth of 10.1%, slightly behind a capacity expansion of 10.6%. At 65.0%, the region’s load factor was the weakest.
In terms of domestic air traffic, all major markets except India showed an expansion in demand in June compared to the previous year. Similar to the developments in international travel however, economic slowdowns in various countries are keeping the growth trend soft throughout 2012. The first six months of 2012 have seen overall domestic air travel growth rate slow to 2%. Overall, domestic demand grew by 4.1%, slightly ahead of capacity which grew by 3.6%. The domestic load factor stood at 81.1%.
India’s domestic travel fell by 0.7% in June even as capacity expanded by 4.5%. The load factor was 74.2%. This is the second month of weak year-on-year growth, and the trend in growth continues to be flat since the start of 2012.
Japan’s domestic market continues to look flat. The post-earthquake and tsunami rebound lost steam towards the end of 2011. Demand was up 10.4% compared to last June, but the overall market remains about 8% below pre-earthquake and tsunami levels. Japanese domestic load factors were the weakest at 58.2%.
Brazil recorded domestic demand growth of 13.8%, double the capacity expansion of 6.5%, and a load factor of 71.1%. The trend in traffic growth since the start of the year has weakened, however, with domestic demand in June more than 1% lower compared to January.
Chinese domestic air travel grew 7.8% compared to the previous June and was below the capacity expansion of 8.7%. This in an improvement on recent months, when year-on-year growth rates fell to levels not seen since the start of 2011. In fact, weakness in the trend in domestic travel has been present throughout 2012, with little increase since the start of the year, consistent with the slowdown seen in the Chinese economy. The load factor, nonetheless, remained strong at 81.3%.
US domestic demand was up 0.8% compared to the previous June. With capacity growth held to 0.1%, US carriers reported a load factor of 86.6% – the highest among the major domestic markets.
“Aviation is the backbone of the tourism industry. On average some 50% of international tourists arrive by air. To benefit the most from tourism, governments need comprehensive and internally coordinated policies. In many parts of the world, aviation suffers from high taxes, insufficient infrastructure and cumbersome regulation. Tourism and aviation ministries understand the catalytic impact of aviation on the economy. Today the industry supports some 57 million jobs and US$2.2 trillion in economic activity. The challenge is to get all ministries aligned and on the same page with policies to facilitate sustainable aviation growth that will drive further benefits across local, regional and national economies,” said Tyler.