IATA Reports Slight Growth in Premium Air Traffic, Weakness in Europe
By James Shillinglaw
August 16, 2012 11:04 PM
The International Air Transport Association (IATA) reported that the number of passengers buying premium seats on international markets grew at a faster rate in June compared to May. Premium travel in June was 4.3 percent higher than the same month a year earlier, compared to a 1.7 percent rise in May year-on-year.
But IATA said a closer look at the data shows that this improvement was small. The level of premium passenger numbers in June was actually no higher than the level reached in March. After signs of faster growth at the end of 2011 and early 2012 the expansion in premium travel has flattened out. The fall of world trade in recent months and the decline in business confidence are likely to have reduced premium class travel.
In contrast, total international travel continues to increase, with the number of passengers 6.2 percent higher in June than a year ago. This solid performance is being supported by economy seat sales, rather than premium travel demand. The number of passengers travelling on economy seats was 6.4 percent higher in June compared to a year ago, up on the 5.4 percent result in May, and significantly stronger than the growth in premium travel.
According to IATA, some of the weakness in premium markets could be due to a shift to cheaper economy seats by business travelers, with the seat class mix showing further decline in the proportion of premium seats sold in June -- making it more difficult for airlines to improve passenger yields. But the primary source of the slowing growth trend is weakness in European markets. As has been the case for several months, the weaker markets in June were within Europe and the North Atlantic, contracting 1.2 percent and 3 percent respectively. Combined, these markets represent over 40 percent of the international premium market by passenger numbers and almost 35 percent by share of revenues.
Air travel growth on markets not connected to Europe was solid overall. Sustained economic growth in the U.S. and Asia has offered support to air transport. Markets within the Far East have been particularly strong so far this year, and in June premium travel in the region increased 8.8 percent compared to a year ago. Travel across the North and Mid Pacific was also robust, expanding 7.1 percent in June compared to a year ago. Furthermore, developing markets within the Middle East and South America continue to grow strongly, both in premium and economy travel.
Weakness in Europe has outweighed strength in air travel markets elsewhere, placing downward pressure on premium travel growth overall. Furthermore, indicators of premium travel demand -- world trade and business confidence -- point to further weakness in coming months.