IATA member traffic results for September 2011 show diverging trends for cargo and passenger traffic.
Passenger traffic was 5.6% higher than the same month last year and stronger than the 4.6% year-on-year growth recorded in August. Air freight on the other hand posted a 2.7% contraction for September compared to September 2010. This is a further deterioration from the 2.4% decline recorded in August.
Tony Tyler, IATA?s Director General and CEO, said, ?September?s strength in passenger demand was a pleasant surprise. Freight demand contracted for a fifth consecutive month and this trend is in line with falling business and consumer confidence. We are still expecting a general weakening in passenger traffic as we head towards the year-end.?
International Passenger Markets
International air travel volumes rebounded to levels reached in July, following a dip in August. The sharp decline in business confidence in most economies, and the weakness in US and European consumer confidence, suggest reluctance for both business and leisure travel. Continuing strong air travel markets may reflect the robust conditions in emerging markets and travel booked earlier in the year when there was more economic optimism.
Passenger load factors stood at 79.5% in September, slightly below the 80.1% recorded for the same month last year. Highest load factors were recorded in North America (82.6%) and Europe (82.4%). The load factor for Asia Pacific airlines slipped to 76% as the region absorbs the largest number of new aircraft deliveries.
Latin America carriers reported the largest increase in demand at 10.6% (up from a 6.4% increase in August), supported by robust economic conditions.
European carriers saw a 9.2% increase, slightly behind the 9.5% increase in capacity. This comes despite the continuing Eurozone crisis. The weak Euro is enhancing Europe?s attractiveness to tourists and creating export opportunities for business.
Traffic carried by Middle East carriers rose by 9.1%, ahead of a capacity increase of 8.5%--a step change from the 15% capacity increases seen in recent years.
Asia Pacific carriers saw a 4.3% increase in demand, well below the 6.3% increase in capacity. Despite strong domestic growth in India and China, growth rates for international markets slowed.
North American carriers recorded a 1.2% increase in demand, the weakest among the regions. It lagged behind a 2.9% increase in capacity.
African carriers experienced a 5% increase in demand, closely matching the 5.2% increase in capacity.
Domestic Passenger Markets
Domestic markets rose strongly in September at 3.8% (up from 2.2% in August). This was also significantly stronger than the 2.8% increase in domestic capacity.
India led the way with 18.4% growth, although slightly below the 20.1% increase in capacity. This was followed by China at 9.7% (more robust than the 8.1% increase in capacity) and Brazil where a 7.5% increase in demand was well below the 14.6% increase in capacity.
The recovery in Japan?s domestic market following March?s earthquake and tsunami stalled in September with traffic 14.5% below previous year levels. This is a step back from the 12.3% decline recorded in August.
Carriers in the US domestic market cut capacity by 0.7% but recorded an increase in demand of 1.6%.
Air Freight (Domestic + International)
Freight volumes have fallen significantly during the third quarter. By September, freight volumes were 5% below those carried at the end of the first quarter. This represents a deterioration in trade and economic conditions. Inventory to expected sales ratios have risen and shipments by air are being cut.
Asia Pacific carriers are the largest players in air cargo and have been the hardest hit with a 6.3% decline in demand compared to September 2010. This is despite robust economic growth in many countries in the region. The disruptions to supply chains as a result of the Japanese tsunami and earthquake continue to dampen air freight in the region.
European carriers also recorded a contraction in demand of 2.4% while North American carriers reported that September freight traffic was flat compared to the previous year.
Bottom Line
Despite stronger than expected growth in passenger markets during September, the industry is bracing for more difficult times ahead. IATA?s recent Airline Business Confidence survey reported a significant decline in profitability expectations over the next 12 months. More worrying is the expectation that unit costs will increase with little optimism for yields. The majority expected no change in passenger yields while 90% of respondents were split equally among those expecting cargo yields to remain the same or decline. IATA is expecting profitability to decline from $6.9 billion in 2011 to $4.9 billion in 2012 for a margin of just 0.8%.
Airlines play a key role in connecting global business. At this time of economic uncertainty in many parts of the world, US plans to raise an additional $36 billion in aviation taxes over the next decade could not be more misguided. Last month the UK recognized the harm that its GBP2.5 billion Air Passenger Duty was doing in Northern Ireland and announced a major cut. It?s time to apply that lesson at a more global level. Increasing the cost of doing business by making air transport more expensive destroys competitiveness. Governments should protect the 33 million jobs and $3.5 trillion in economic activity supported by aviation with a sound policy framework?not by suffocating the industry with taxes,? said Tyler.
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