Passenger traffic slows down during June, IATA says

Posted by John McHale GENEVA, Switzerland, 31 July 2011. Officials at the International Air Transport Association (IATA) say that passenger traffic for the June 2011 slowed due to a decrease in demand for air travel and freight markets. However, compared to June last year, passenger demand was up 4.4 percent while freight demand was 3 percent lower. IATA officials say the slowdown reflects slower economic growth and increased costs resulting from higher jet fuel prices, and increased taxation -- in some countries.Meanwhile, freight volumes have not grown since last summer. May 2010 was the post-recession re-stocking peak, compared to which the June 2011 international freight market was 6 percent smaller, IATA analysts say. While world trade is expanding at 7 percent 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 percent. For passenger traffic, this is a speed-bump in a gradual post recession improvement. But air cargo continues in the doldrums at 6 percent below the post-recession peak," says Tony Tyler, IATA's director general and chief executive officer.The U.S., which represents more than 50 percent of domestic travel, posted 1.3 percent growth in June. Overall demand for international passenger services grew by 5.9 percent and capacity expanded by 7.2 percent. While load factors were maintained at 79.0 percent, this is 0.9 percentage points below the June 2010 performance. According to IATA European carriers are showing the second most robust expansion of demand with 8.9 percent growth compared to June 2010. The weak euro is supporting a strong inbound travel trend and business travel associated with growing exports. Load factors for the region stood at 80.6 percent, the second highest among regions. Middle East carriers recorded a 6.4 percent increase in demand against a capacity increase of 8.4 percent for a load factor of 74.8 percent. For the second consecutive month both demand and capacity increases by Middle East carriers have fallen behind those of Europe and Latin America. Asia Pacific carriers saw demand grow by 3.3 percent. 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. The weakness in Japan's international market has knocked 0.5percent percentage points off the region's growth. Asia Pacific carriers recorded a load factor of IATA officials are forecasting an industry profit of $4 billion for 2011 which is a 78 percent 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 percent. Based on a forecast average oil price of $110per barrel for 2011 and a jet fuel price of $126.5 per barrel, the industry fuel bill is expected to be $176 billion which accounts for 30 percent of costs."The industry is living in several different realities," Tyler says. "With high load factors and an upward growth trend, the passenger business is doing better than cargo. But regional growth patterns are shifting. 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," he continues. "The average price for the second quarter was $133 per barrel which is an increase of $10 over the first quarter. With an expected profit margin of only 0.7 percent, 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."See also:Airline profits to drop by 78 percent this year; North American airline profits to drop by 70 percent, IATA saysIATA seals partnership with UkraineIATA says global aviation returning to profitability, but Europe remains in the red