Last updated: 02:09 PM ET, Mon March 16 2015

IATA Says Hurricane Sandy Delivered Punch to Air Traffic Results

Airlines & Airports International Air Transport Association (IATA) James Shillinglaw November 29, 2012

The International Air Transport Association (IATA), in announcing global traffic results for October, said there has been a persistent softening of passenger traffic growth and a significant deterioration in freight demand. IATA said Hurricane Sandy was the big news in October for the aviation industry. In total, nearly 17,000 flights were cancelled to the five most affected airports (the three New York area airports of John F. Kennedy, Newark and LaGuardia, as well as Washington-Dulles and Philadelphia). At the peak of the storm on Monday, Oct. 29, 8 to 9 percent of global capacity was grounded, which is equal to 1.6 billion available seat kilometers.

A conservative estimate of lost revenues as a result of the hurricane is $0.5 billion. While there would be some savings from unused fuel, additional costs including those for passenger care and out-of-position crew would have been incurred. “The human toll and physical destruction of Hurricane Sandy remain foremost in our minds. It also dealt the airline industry a $0.5 billion blow at a time when it can least afford it,” said Tony Tyler, IATA director general and CEO. “At the same time, the disruption of thousands of flights demonstrated just how connected the aviation industry has made the world. Direct flight cancellations reached airports as far apart as Singapore, Johannesburg and Santiago. Meetings were cancelled, shipments delayed, conferences postponed and supply chains disrupted. A smooth functioning aviation industry is a critical component of modern life that is often taken for granted.”

Passenger demand rose 2.8 percent compared to October 2011, but declined 0.5 percent compared to September. Capacity increased by 2.3 percent over the year-ago period, and load factor rose 0.4 percentage points to 78.8 percent.

October freight demand was 3.5 percent below the previous year level and declined 2.2 percent compared to September. The freight load factor weakened to 46.1 percent from 46.7 percent a year ago. “Slowing world trade and weak business confidence are affecting demand for air travel, while Hurricane Sandy delivered a concentrated punch to U.S. domestic and North Atlantic travel -- and its impact was felt globally,” said Tyler. “Airlines are managing the softer passenger demand environment by limiting capacity growth to keep load factors high. But the rapid decline in freight traffic is outrunning the industry’s ability to respond.”

October international passenger demand was up 3.2 percent compared to the year-ago period, but contracted 0.2 percent compared to September. Several regions saw demand weaken compared to the prior month but in some cases results were affected by Hurricane Sandy, which struck the U.S. East Coast in late October. International capacity rose 2.2 percent year-over-year and the load factor rose 0.8 percentage points to 78.3 percent.

European carriers recorded 2.6 percent growth on international services compared to October 2011, the highest growth among the major regions although down from 5.5 percent year-on-year growth recorded in September. The load factor of 80.9 percent was the second strongest among the regions. Compared to September, European carriers experienced a 1.6 percent decline in traffic as Hurricane Sandy negatively impacted transatlantic travel, but the underlying growth trend continued despite weak or no economic growth in many European economies.

North American airlines’ international traffic rose 0.2 percent compared to October 2011 after rising 2.1 percent in September. However, seat capacity declined 2.2 percent -- reflecting the impact of Sandy -- and load factor rose 2 percentage points to 82.2 percent, the highest among the regions. Demand declined 0.9 percent compared to September.

Asia-Pacific carriers experienced an increase of just 1.4 percent compared to October 2011, unchanged from September’s year-over-year performance. Strong competition on long haul markets could be holding down growth for the region’s airlines, and reductions in international seat capacity by Indian airlines would also be contributing to the weaker growth. Compared to September, traffic rose 1.1 percent.

Middle East carriers experienced the strongest traffic growth at 12.4 percent year-over-year, although this was nearly matched by a 12.1 percent rise in capacity that held the rise in load factor to just 0.2 percentage points to 75 percent. Compared to September, traffic rose 1.1 percent. Latin American airlines posted growth of 6.8 percent, second best among the regions, although this was eclipsed by a 7.6 percent rise in capacity that pushed load factor down to 76.2 percent from 76.8 percent. Compared to September, traffic declined 0.5 percent. The export-dependent continent remains vulnerable to declines in global demand, but in the second half of the year major economies like Brazil have shown signs of acceleration in economic growth. In September, consecutive quarterly expansion in GDP growth marked an upturn in the Brazilian economy, helping maintain demand for air travel. African airlines’ traffic climbed 2.8 percent compared to October 2011, while capacity rose 2.4 percent, raising load factor 0.3 percentage points to 67.7 percent, the lowest of any region. Demand declined 0.4 percent compared to September.

Domestic markets rose 2.1 percent in October compared to a year ago, down from a 2.5 percent year-on-year rise recorded in September. The domestic market growth trend has been soft throughout most of 2012, and the market shrank 0.9% between September and October, partly owing to the impact of Hurricane Sandy on the US domestic market. Weakness in India, Japan and the U.S., stands in stark contrast to the strong growth experienced in China and Brazil.

U.S. traffic slipped 0.7 percent in October while capacity fell by 1.1 percent, pushing load factor up to 84 percent, the highest among all the domestic markets. IATA estimated that two-thirds of all passengers impacted by Hurricane Sandy were US domestic passengers. Demand declined 1.1 percent compared to September.

China’s domestic market continued to rebound from the slowdown earlier this year with growth of 7.5 percent compared to October 2011. With capacity up 11 percent, load factor dropped 2.6 percentage points to 80.6 percent, which was still among the highest for any domestic market. Demand declined 1.5 percent compared to September.

Japan’s domestic market fell 0.5 percent versus the year-ago period but climbed 1.5 percent compared to September. Capacity rose 2.6 percent year-over-year and load factor was the lowest for any market at 66.8 percent. The market still has not recovered from the impact of the 2011 earthquake and tsunami. Moreover, domestic demand in the export-driven nation is suffering from the slowdown in global trade.

Brazil experienced the strongest growth, with traffic up 9.8 percent on a 0.9 percent rise in capacity, propelling load factor up 6 percentage points to 73.2 percent. The healthy result supports indications of an economic recovery in Brazil. Traffic expanded 0.2 percent compared to September.

Indian domestic traffic plunged 12.4 percent in October compared to a year ago, the worst performance for any market, reflecting the weakening economy and the struggles within the domestic airline industry. Capacity declined 7.3 percent and load factor fell 4.1 percentage points to 70.1 percent.

James Shillinglaw