Iata reports strong global growth in January

The International Air Transport Association (Iata) announced international scheduled traffic results for January showing an 8.2 per cent increase in passenger traffic and 9.1 per cent growth in air freight compared to January 2010.

“We begin the year with some good news. January traffic volumes are up—8.2 per cent on January 2010 and 2.6 per cent on December. With most major indices pointing to strengthening world trade and economic growth, this is positive for the industry’s prospects. But we are all watching closely as events unfold in the Middle East. The region’s instability has sent oil prices skyrocketing. Our current forecast is based on an average annual oil price of $84 per barrel (Brent). Today the price is over $100. For each dollar it increases, the industry is challenged to recover $1.6 billion in additional costs. With $598 billion in revenues, $9.1 billion in profits and a profit margin of just 1.5 per cent, even with good news on traffic 2011 is starting out as a very challenging year for airlines,” said Giovanni Bisignani, Iata’s Director General and CEO.

By January 2011, air travel volumes were 18 per cent higher compared to the low point reached in early 2009 and some 6 per cent above the pre-recession peak of early 2008. Air freight in January was 39 per cent above the low point reached at the end of 2009 and some 6 per cent above the pre-recession peak of early 2008. Freight has, however, fallen 2 per cent since its May 2010 peak at the height of the re-stocking bubble.

International passenger demand

The 8.2 per cent growth in passenger traffic shows a recovery from December’s slowdown (with 5.4 per cent growth) that was related to severe weather in Europe and North America which reduced total traffic by 1-2 per cent.

Passenger load factors are high, but there is evidence that supply growth is beginning to run ahead of demand. Compared to the previous January, the 8.2 per cent demand increase was outstripped by a 9.1 per cent increase in capacity, resulting in an average load factor of 75.7 per cent . Adjusting for seasonality this is equates to a 77.7 per cent load factor. This is a 1.1 percentage point drop from the October 2010 peak.

Europe’s carriers recorded a 7.9 per cent year-on-year growth in passenger traffic and an 8.8 per cent increase in capacity. Strong January performance reflects a rebound from December which was depressed by cancellations due to severe weather. Nonetheless, with capacity growth outstripping demand, the load factor slipped by 0.6 percentage points to 73.9 per cent.

North American carriers recorded an 8.7 per cent year-on-year growth in demand and a 10.0 per cent increase in capacity in January. This imbalance saw load factors slip by nearly a full percentage point to 77.2 per cent . International passenger traffic carried by North American airlines has now recovered to 2 per cent above its pre-recession peak of early 2008.

Asia-Pacific carriers recorded a 5.8 per cent year-on-year demand increase in January, more than double the 2.8 per cent increase recorded in December. Increasingly strong economic growth is driving the acceleration in travel market growth. Capacity increased by 7.0 per cent , pushing the load factor down 0.9 percentage points to 77.7 per cent.

Latin American carriers recorded an 11.0 per cent growth in demand and a 12.4 per cent growth in capacity. The region’s load factor fell by 1 percentage point to 79.7 per cent but it is still the highest in the world. Traffic volumes in January were some 16 per cent higher than the pre-recession peak in early 2008. Latin American traffic comparisons have now been adjusted to eliminate the impact of the Mexicana bankruptcy and more accurately reflect the growth taking place with carriers actually operating in the region.

Middle East carriers saw demand grow 11.7 per cent in January compared to January 2010. The post recession recovery has been the strongest – some 45 per cent higher compared to the low point in September 2008. The region’s economy looks positive with a predicted 4.2 per cent GDP growth which is likely to sustain growth in the air traffic market. Political instability in parts of the region is expected to dampen demand in the affected areas. Egypt, Libya and Tunisia combined comprise around a fifth of the region’s international passenger traffic.

African carriers grew by 14.3 per cent year-on-year and passenger traffic levels are now around 28 per cent higher compared to the previous peak reached in early 2008. However, this market has a relatively small impact as it represents about 3 per cent of the total traffic. African load factor grew slightly to 68.7 per cent , the lowest of any region.

Freight Demand

Air freight volumes expanded at a robust 9.1 per cent in January after a revised 7.3 per cent in December and 6.9 per cent in November.

Freight load factor stood at 49.2 per cent. All regions reported levels relatively unchanged from a year ago. The seasonally-adjusted freight load factor of 53 per cent reported in January is within a range of 52-54 per cent since mid-2010, as demand and supply conditions are now stabilizing.

January freight carried by Asia-Pacific carriers showed a 6.4 per cent year-on-year increase. While this growth is slightly lower than the 7.2 per cent reported for December 2010, the volume of freight carried by airlines based in the region actually increased by 2 per cent during January alone. The growth in January takes the volume of air freight carried to 6 per cent above the pre-recession peak level and 48 per cent higher than the recession trough.

Freight carried by North American carriers was up 14.1 per cent in January compared to levels a year ago, the highest of any region. The volume of traffic has grown by 11 per cent since November last year, and now sits 10 per cent above the pre-recession peak. The much weaker economic climate in Europe continues to hold back freight traffic recovery for airlines in that region. Volumes are still 11 per cent below the pre-recession peak.

“As if the rising price of oil was not challenging enough, governments are increasing the cost of mobility with a growing contagion of taxes. In 2010 the industry was hit with billions of dollars of new or increased taxes in the UK, Austria and Germany. Now we see South Africa and Iceland planning increases. Governments need to improve their finances and restart their economies. Mobility is a catalyst for economic growth. Governments must understand that taxing air transport out of the range of price sensitive travelers and businesses makes very little economic sense,” said Bisignani.

Iata’s forecast for 2011 was made in December 2010 and anticipates an industry profit of $9.1 billion or a 1.5 per cent net profit margin on $598 billion in revenues. This is based on an average annual oil price of $84 per barrel, a demand increase of 5.3 per cent, flat cargo yields and a 0.5 per cent increase in passenger yields. Iata will revise this forecast on 2 March.

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