World air travel and freight growth slows again in July: Iata

The International Air Transport Association (IATA) has announced global traffic results for July showing slower growth in both air travel and freight, but with considerable variation by region and market.

July passenger demand in aggregate was 3.4 per cent higher than the same month last year, compared to a 6.3 per cent increase in June and average growth of 6.5 per cent over the first half of the year.

July freight demand was 3.2 per cent lower than it was in the same month last year. This is down on the 0.1 per cent year-on-year growth rate of June. A large part of that decline was due to a comparison with a relatively strong July last year, but overall the trend in air freight is weak, in line with subdued world trade growth.

Airlines have responded to this slower growth environment by reducing the capacity added to markets, a move which has stabilized load factors at relatively high levels and provided some support for profitability in the face of high fuel prices. In July passenger capacity rose 3.6 per cent, in line with the expansion of traffic, keeping the load factor at a relatively high 83.1 per cent.

“The uncertain economic outlook is having a negative impact on demand for air transport,” said Tony Tyler, Iata’s Director General and CEO. “The cargo business is 3.2 per cent smaller than it was a year ago. And passenger markets — with the exception of Africa, China-domestic and the Middle East — saw demand fall from June to July. Overall passenger demand is still up 3.4 per cent on the previous July. But the growth trend is clearly slowing. This, along with rising fuel prices is likely to make it a tough second half of the year.”

International passenger markets

July international passenger demand was up 3.5 per cent compared to the year-ago period, exactly in line with a 3.5 per cent expansion in capacity. Load factors stood at 83.3 per cent. The slowdown becomes evident when comparing to the previous month (June) when the year-on-year rate was 7.5 per cent. Growth on average during the first half of the year was also 7.5 per cent.

The slowdown in international air travel growth has been concentrated in the past few months, in line with the decline of business confidence. Weakness in some key domestic air travel markets has been evident for rather longer period. Only African and Middle Eastern carriers showed month-to-month growth. Carriers in all other regions reported aggregate declines for international demand for July compared to June.

European carriers recorded 4.8 per cent growth (down from 7.3 per cent in June) on international services compared to July 2011 with an average load factor of 85.7 per cent. That was a relatively modest slowdown from the 6.5 per cent average growth seen during the first half of the year. Despite the recession in many European home markets, airlines from the region have been able to sustain growth on long-haul markets to regions where economic growth is stronger.

North American airlines’ international traffic fell 2.1 per cent year-on-year in July (after rising 1.6 per cent in June) in part owing to decisions to trim capacity, particularly on the North Atlantic market. Compared to June (the previous month), demand contracted by 1.3 per cent. The load factor was 86.7 per cent, the highest among all regions.

Asia-Pacific carriers saw demand growth of just 0.9 per cent. This is a major slowdown from the 5.8 per cent recorded in the June year-on-year comparison. Moreover, compared to the previous month (June 2012), demand contracted by 1.3 per cent. European airlines appear to be benefiting more than Asia-Pacific airlines from the recently stronger trade flows from West to East, while the Middle Eastern airlines continue to offer strong competition on long-haul markets. The downward growth trend began in the second quarter of 2012 and has now continued into the third.

Latin American airlines posted growth of 5.7 per cent, second highest among the regions. The load factor stood at 82 per cent. The region’s carriers, however, could not buck the slowdown trend, after average growth of 10.1 per cent in the first half of the year. Recently key economies in the region, such as Brazil, have seen an interruption to economic growth, which has affected travel and freight.

Middle East carriers experienced the strongest traffic growth at 11.2 per cent year-over-year, although this was surpassed by a 12.4 per cent rise in capacity. Compared to June, traffic rose just 0.1 per cent. The region’s growth trends were impacted by Ramadan, which commenced in July this year.

African airlines’ traffic climbed 5.2 per cent year-on-year, below a 6.3 per cent rise in capacity. Load factor was 73.1 per cent, by far the lowest of any region. The continent’s airlines have seen strong growth of 10.8 per cent on average during the first half of the year. This has partly been a rebound from the Arab Spring, but also reflects the relative success of many African economies at present.

Domestic passenger markets

Domestic markets also experienced slow growth, continuing the trend that began early this year. In total, traffic rose 3.1 per cent year-on year, down from 4.2 per cent in June. However, the slowdown was not universal, with China and Brazil recording strong growth that was offset by weakness in India and Japan.

China’s domestic market rebounded sharply from the slowdown earlier this year to post 9 per cent demand growth in July, up from the 7.8 per cent year-over-year growth seen in June. With capacity up 12.1 per cent, load factor slipped to 84.1 per cent from 86.5 per cent last year.

Japan’s domestic market rose just 4.2 per cent versus the year-ago period and actually slipped 1 per cent compared to June. Capacity rose 7.9 per cent and load factor was the lowest for any market at 58.7 per cent. Overall the market has contracted 4 per cent this year and is 10 per cent smaller than pre-earthquake levels.

US traffic slipped 0.4 per cent in July while capacity rose by 0.2 per cent. Load factors dipped to 86.8 per cent from 87.4 per cent last year, still the highest among all the domestic markets.

Brazil experienced the strongest growth after China, with traffic up 8.5 per cent on a 3.0 per cent rise in capacity. Load factor rose to 77.7 per cent from 73.8 per cent last July. However growth softened compared to June, declining 2.3 per cent.

ndian domestic traffic declined slightly by 1.1 per cent compared to a year ago, after expanding at 20 per cent-plus rates through 2010 and early 2011. July capacity rose 2.1 per cent, dropping the load factor to 69.6 per cent from 71.8 per cent last year.

Air freight (domestic and international)

Air freight demand contracted 3.2 per cent compared to July 2011 but was unchanged compared to June. Middle East carriers recorded a 16 per cent increase in demand year-on-year but all other markets experienced declines and the small recovery seen since the end of 2011 has stagnated.

Asia-Pacific carriers saw a 7.6 per cent decline in demand in July compared to the previous year, the steepest decline for any region, while capacity dipped just 4.3 per cent. Asia-Pacific carriers have
experienced virtually no growth in freight traffic since the fourth quarter of 2011. European airlines had a 3.6 per cent decline in traffic, with a 0.9 per cent rise in capacity. Europe’s airlines have seen only a 1 per cent rise in demand since the 2011 fourth quarter. North American airlines had a 3.6 per cent drop in demand, matching a similar reduction in capacity. Load factor was the lowest for any region at 32.3 per cent.

Middle Eastern carriers’ 16 per cent rise in traffic came on an 11 per cent boost in capacity, helping raise load factors 2 percentage points to 45.3 per cent.
 

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