Air travel demand growth slows
The growth in demand for air travel slowed in May 2012, according to the latest figures from IATA.
The aviation body revealed that while global passenger demand was still 4.5% ahead of May 2011, growth was virtually flat compared with April 2012, reflecting what IATA called “a general downward trend in line with deteriorating global economic conditions”.
Available seat capacity in May 2012 increased 4.0%, while average cabin load factors stood at 77.6%, below the record highs experienced in April.
“The airline industry is fragile. Relief in oil prices provides some good news. Unfortunately, the softness in oil markets comes on the back of fears of deterioration in the European economy. Business and consumer confidence are falling. And we are seeing the first signs of that in slowing demand and softer load factors. This does not bode well for industry profitability. Airlines are expected to return a US$3 billion profit in 2012 on US$631bn in revenues. That’s a razor-thin 0.5% margin,” said Tony Tyler, IATA’s Director General & CEO.
International passenger demand was up 5.6% compared to May 2011 – well below the 7.1% growth recorded in April. All regions except the Middle East saw slowing month-on-month growth. A 4.1% capacity expansion, however, helped improve load factors from 75.9% in May 2011 to 77.0% for the current month.
Airlines in the Asia Pacific region saw a 5.5% year-on-year rise in demand. This was ahead of capacity expansion of 3.1%, pushing load factors to 75.4%. Year-on-year comparisons were affected however, by the poor performance of Japanese traffic in May 2011. Compared to April, demand actually declined 0.8%, while load factors slipped 0.4 percentage points.
European carriers posted 4.1% growth on international routes when compared to the previous May. This is significantly below the 5.7% year-on-year growth recorded for April, but the region’s load factor of 78.5% was 1.5 percentage points ahead of the global average. IATA noted that traffic growth for European carriers “basically stopped at the end of 2011”. Since the beginning of 2012, the growth trend has been flat, in line with the economic conditions on the continent.
North American airlines experienced a 1.5% increase on international demand in May compared to the previous year. This is relatively unchanged from the 1.6% year-on-year growth recorded in April. Load factors for the region’s carriers averaged 82.1% for the month, the highest of any region, reflecting the tight capacity management which has supported the recent upward revision of the region’s profit forecast for 2012 from US$1.3bn to US$1.4bn.
Middle Eastern carriers showed the strongest growth at 15.8%, outstripping capacity expansion of 11.9%. Load factors however, remained the second-weakest among regions at 74.0%. The Middle East’s airlines were also the only ones to report accelerated demand growth compared to April, when the region’s airlines reported 15.2% growth. The double-digit growth in April and May however, is largely due to last year’s Arab Spring, which had a major affect on traffic to the region in 2011.
Latin American airlines recorded solid growth of 7.4% – ahead of a 5.5% capacity expansion – while African airlines saw year-on-year demand growth of 9.7%, although load factors remain the world’s weakest at just 62.9%.
Domestic passenger markets grew at less than half the rate of international flights – just 2.7%. This was significantly below the 4.1% year-on-year growth recorded in April, and load factors were 0.8% points below those reported for May 2011.
Japan experienced the strongest domestic traffic growth, up 14.8% year-on-year. While this marks a recovery from last year’s natural disasters, IATA estimated that even accounting for the adjustment, Japanese domestic traffic still would have improved by about 4%. Load factors however, remain the lowest of any major domestic market, at just 58.4%.
China’s domestic rose 4.4% against an 8.3% increase in capacity, pushing load factors down to 78.6%. Compared to April, domestic demand was virtually unchanged. In the US, domestic demand slipped 0.1% in May while capacity rose by 0.3%. Load factors dipped slightly to 84.3% but remain the highest among all the domestic markets.
Indian domestic traffic rose just 0.1% year-over-year, but fell 2.7% compared to April. Load factors stood at 76.8%.
“Whether bringing people together or moving cargo around the globe, aviation is vital to modern life,” said Tyler, “We need governments to move from recognition to action with tax policies that don’t kill growth, regulation that enables growth and infrastructure to accommodate growth.”