IATA Reports Demand Growth Slows for Airlines in May
The International Air Transport Association (IATA) announced global traffic results for May showing a general decrease in demand for air travel amidst deteriorating global economic conditions. While passenger demand was 4.5 percent ahead of levels in May 2011, growth was virtually flat compared to April 2012. Capacity increased by 4 percent and load factors stood at 77.6 percent, below the historically high levels recorded in April.
“The airline industry is fragile. Relief in oil prices provides some good news. Unfortunately, the softness in oil markets comes on the back of fears of deterioration in the European economy,” said Tony Tyler, IATA’s director general and CEO. “Business and consumer confidence are falling. And we are seeing the first signs of that in slowing demand and softer load factors. This does not bode well for industry profitability. Airlines are expected to return a $3 billion profit in 2012 on $631 billion in revenues. That’s a razor-thin 0.5 percent margin.”
International passenger demand was up 5.6 percent compared to May 2011. That is well below the 7.1 percent growth recorded in April. All regions, except the Middle East, saw growth in passenger demand slow in May compared to April. A 4.1 percent capacity expansion, however, helped improve load factors from 75.9 percent in May 2011 to 77 percent for the current month.
European carriers posted 4.1 percent growth on international services when compared to the previous May. This is significantly below the 5.7 percent year-on-year growth recorded for April. The region’s load factor of 78.5 percent was 1.5 percentage points ahead of the global average. Traffic growth for European carriers basically stopped at the end of 2011. Since the beginning of 2012, the growth trend has been basically flat, in line with the economic pessimism throughout the continent.
North American airlines experienced a 1.5 percent increase on international demand in May compared to the previous year. This is below but relatively unchanged from the 1.6 percent year-on-year growth recorded in April. Load factors for the region’s carriers averaged 82.1 percent for the month, the highest among the regions. According to IATA, this reflects the tight capacity management conditions supporting the recent upward revision of profitability prospects to $1.4 billion (slightly ahead of the $1.3 billion that the region’s carriers made in 2011).
Asia-Pacific carriers showed a 5.5 percent expansion in demand over the previous year period. This was ahead of capacity expansion of 3.1 percent, pushing load factors to 75.4 percent. In April, the region’s carriers recorded 8.6 percent growth -- heavily skewed from the impact of the Japanese earthquake and tsunami in 2011. Compared to April, demand actually declined 0.8 percent, while load factors slipped 0.4 percentage points.
Middle East carriers showed the strongest growth at 15.8 percent, outstripping capacity expansion of 11.9 percent. Load factors were the second weakest among regions at 74 percent. This is, however, a 0.4 percent point improvement compared to April. The Middle East carriers were the only ones to report aggregate accelerated demand growth compared to April, when the region’s airlines reported 15.2 percent growth.
Latin American airlines recorded solid growth of 7.4 percent. This was ahead of a 5.5 percent capacity expansion and left load factors at 77.1 percent, 1.4 percentage points ahead of May 2011 levels. African airlines saw demand growth of 9.7 percent compared to May 2011, below a capacity expansion of 11.8 percent. Load factors stood at 62.9 percent.
Domestic markets grew at slightly less than half the rate of international markets, just 2.7 percent. This was significantly below the 4.1 percent year-on-year growth recorded in April. Load factors of 78.8 percent were 0.8 percentage points below the 79.6 percent reported for May 2011.
Japan experienced the strongest traffic growth, up 14.8 percent year-on-year. If the impact of the Japanese earthquake and tsunami is stripped out, IATA estimates that Japanese domestic traffic still would have improved year-on-year by about 4 percent. Load factors of 58.4 percent were the lowest among major domestic markets.
China’s domestic demand has slowed to growth rates last seen in early 2011. This reflects a slowdown across the Chinese economy. Traffic rose 4.4 percent against an 8.3 percent increase in capacity, pushing load factors down to 78.6 percent. Compared to April, Chinese domestic demand was virtually unchanged.
U.S. domestic demand slipped 0.1 percent in May while capacity rose by 0.3 percent. Load factors dipped slightly to 84.3 percent, still the highest among all the domestic markets.
Brazil experienced the strongest growth after Japan, with traffic up 7.2 percent on a 6.7 percent rise in capacity. Load factors rose to 65 percent. However growth softened compared to April, declining 3.1 percent. India domestic traffic rose just 0.1 percent year-over-year, but fell 2.7 percent compared to April. Load factors stood at 76.8 percent.
For more information on International Air Transport Association (IATA)
For more Features & Advice News
More by James Shillinglaw
More Features & Advice News
Recent Travel Opinions