International Air Traffic Up Emerging Concern Over Oil Prices

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International Air Traffic Up Emerging Concern Over Oil Prices By Steve Hall

		March 2, 2011 - The International Air Transport Association (IATA) announced international scheduled traffic results for January showing an 8.2% increase in passenger traffic and 9.1% growth in air freight compared to January 2010. “We begin the year with some good news. January traffic volumes are up—8.2% on January 2010 and 2.6% on December. With most major indices pointing to strengthening world trade and economic growth, this is positive for the industry’s prospects,” said Giovanni Bisignani, IATA’s Director General and CEO. “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%, even with good news on traffic 2011 is starting out as a very challenging year for airlines.” By January 2011, air travel volumes were 18% higher compared to the low point reached in early 2009 and some 6% above the pre-recession peak of early 2008. Air freight in January was 39% above the low point reached at the end of 2009 and some 6% above the pre-recession peak of early 2008. Freight has, however, fallen 2% since its May 2010 peak at the height of the re-stocking bubble. International Passenger Demand The 8.2% growth in passenger traffic shows a recovery from December’s slowdown (with 5.4% growth) that was related to severe weather in Europe and North America which reduced total traffic by 1-2%. 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% demand increase was outstripped by a 9.1% increase in capacity, resulting in an average load factor of 75.7%. Adjusting for seasonality this is equates to a 77.7% load factor. This is a 1.1 percentage point drop from the October 2010 peak. Europe’s carriers recorded a 7.9% year-on-year growth in passenger traffic and an 8.8% 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%.

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

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

Latin American carriers recorded an 11.0% growth in demand and a 12.4% growth in capacity. The region’s load factor fell by 1 percentage point to 79.7% but it is still the highest in the world. Traffic volumes in January were some 16% 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% in January compared to January 2010. The post recession recovery has been the strongest – some 45% higher compared to the low point in September 2008. The region’s economy looks positive with a predicted 4.2% 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% year-on-year and passenger traffic levels are now around 28% higher compared to the previous peak reached in early 2008. However, this market has a relatively small impact as it represents about 3% of the total traffic. African load factor grew slightly to 68.7%, the lowest of any region.

Air freight volumes expanded at a robust 9.1% in January after a revised 7.3% in December and 6.9% in November. Freight load factor stood at 49.2%. All regions reported levels relatively unchanged from a year ago. The seasonally-adjusted freight load factor of 53% reported in January is within a range of 52-54% since mid 2010, as demand and supply conditions are now stabilizing.

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

Freight carried by North American carriers was up 14.1% in January compared to levels a year ago, the highest of any region. The volume of traffic has grown by 11% since November last year, and now sits 10% 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% 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% 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%, flat cargo yields and a 0.5% increase in passenger yields. IATA will revise this forecast on 2 March. Other News Stories GE Purchased B-747 For Testing Next Generation Of Jet Engines World’s First Operational Life Size Hummingbird Like Unmanned Aircraft Employee Of Delta Airlines Arrested On Impersonating A Federal Air Marshal Southwest Airlines Adopt-A-Pilot Program Lands In Schools Nationwide South Carolina Governor Hires Law Firm To Fight Aircraft Mechanics Union Cirrus Aircraft To Be Sold To China Aviation Industry General Aircraft Co Flight Instructors At Florida Institute of Technology Voted To Unionize DOT Fines American Airlines For Failing To Disclose Oversales Voucher Fees Nepal Airline's Chairman, Sugat Kansakar Jailed On Aircraft Purchase Corruption FL Governor Being Questioned On Decision To Sell State Aircraft Piper Aircraft Showing Strong Growth In New Aircraft Sales Sen. Shelby Alarmed French Company Not Awarded KC-46 Contract Lockheed Martin Flies First Production F-35 Stealth Fighter Air Force Awards Boeing KC-46 Aerial Refueling Tanker Contract FAA Approves Southwest Airlines Acquisition Of AirTran Airways Laser Autoboresight Protect Rotary Aircraft Against Missile Attacks Findings Reveal Healthcare Providers Properly Utilized Helicopter EMS Aircraft Accident Rate Is Lowest In History Business Aviation Data Prompts Cautious Optimism From Industry Leaders Gulfstream To Display Three Aircraft At Avalon 2011 TSA Administrator Applauds Adoption of Global Aviation Security Measures Airline Passengers And Flight Crews Gain Ground In OSHA Protection Fighting Stolen Aircraft Parts