Airline Passenger Traffic Continues To Be Affected By High Oil Prices


  Bookmark and Share

Airline Passenger Traffic Continues To Be Affected By High Oil Prices

By Shane Nolan

May 6, 2012 - The International Air Transport Association (IATA) announced global traffic results for March showing that total passenger demand rose 7.6% and freight demand climbed 0.3% compared to the same month last year. 

Comparisons with March last year are affected by events that depressed passenger demand in 2011, including the Arab Spring, which disrupted travel in the Middle East and North Africa beginning in February 2011 and the earthquake and tsunami in Japan in March 2011 that impacted air travel across the Asia-Pacific region.

IATA estimates that the year-on-year rise in air travel in March was about two percentage points higher than it would otherwise have been in the absence of these events. 

Cargo demand, meanwhile, was affected by the timing of the Chinese New Year, which occurred in January this year leading to stronger February shipments?but took place in February 2011?leading to stronger March 2011 shipments and weaker year-to-year comparisons. Compared to February 2012, March air cargo demand was significantly stronger by 2.2%. 

?If we discount the industry?s growth by two percentage points as a result of the extraordinary events in 2011, airlines still managed an expansion in the range of 5-6%.  Given the prevailing economic conditions with some European states returning to recession, passenger demand is holding up well. But this is bringing little relief to the bottom line because yields are not keeping pace with the continued very high price of oil,? said Tony Tyler, IATA?s Director General and CEO. 

Oil prices have remained stubbornly above $100/barrel (Brent crude) for the past 14 months. In 2008, oil prices rose from $90/barrel in January to a peak of $147/barrel in late July. But by November, they had fallen back to less than $50/barrel. ?We have not seen such sustained high oil prices previously. Jet fuel prices have risen 8% since January. Considering that fuel now accounts for 34% of average operating costs, it?s an increase that hurts,? said Tyler. 

Total passenger capacity rose 4.4% compared to March 2011, resulting in a load factor of 78.3%, up 2.4 percentage points over the year-ago period. Freight capacity, however, climbed 1.7% year-on-year, above the rate of demand, placing pressure on load factors.


International air travel rose 9.6% in March compared to the year-ago period, while capacity climbed 5%, resulting in a load factor of 77.7%, up 3.2 percentage points from March 2011. 

European airlines recorded the strongest traffic growth among the major regions despite deepening recessions in parts of the continent, with demand up 8.8% year-on-year, on a 4.1% increase in capacity. Load factor rose to 78.5%.  This growth is partly the result of expanding European exports to stronger Asian economies and the associated business travel. 

Asia-Pacific carriers also experienced healthy growth, with demand up 8.1% on a 4.3% rise in capacity, pushing load factors up to 76.5%. Year-to-year comparisons were impacted by the March 2011 Japan earthquake and tsunami, which are estimated to have reduced 2011 demand by 3%, exaggerating year-over-year growth by a like amount. 

North American airlines had a 5.3% rise in passenger traffic, a solid performance for the region and concurrent with better economic results from the US, particularly with increasing consumer confidence.  Capacity rose at a much slower rate than demand, by 0.9%, pushing load factors up fractionally to 80.3%, the highest of all the regions.  Very tight capacity control in this region is allowing airlines to boost asset utilization, helping to offset part of the rise in fuel costs. 

Middle East airlines? demand jumped 20.9% on a 12.4% rise in capacity, propelling load factors to 78.7%. This was the largest rate of growth for any region but mostly reflects the weakness of travel last year following the Arab Spring. IATA estimates this inflated traffic gains by seven percentage points. 

Latin American carriers experienced the second-slowest demand growth among the regions, but traffic still rose 7.7% year-over-year on a 6.7% rise in capacity. Passenger load factor was 77.9%. It is among the regions least impacted by the distortions in 2011 and this latest expansion reflects a continuation of the steady growth seen since early 2009. 

African airlines reported a 14.3% rise in traffic, of which an estimated 11 percentage points was attributed to traffic suppression in March 2011 owing to the Arab Spring. Capacity rose 10.7%, resulting in a load factor of 64.8%, which although an improvement year-over-year, was by far the lowest among the regions. 

Domestic markets grew at less than half the rate of international markets, just 4.5%, in part owing to the timing of Carnival in Brazil but also owing to slower growth in India.  

Japan experienced the strongest traffic growth, up 15.5% year-on-year. This, however, reflects the devastating impact on year-ago traffic of the natural disasters of March 2011. March 2011 traffic was down 27% on March 2010 and the performance would have been worse had the earthquake struck earlier in the month. While the market has significantly recovered, domestic traffic levels remain 10% below those of the pre-crisis period. In fact, since the end of last year, domestic travel has started to retreat. Capacity was 2.6% below previous-year levels and the load factor was 64.8%, the lowest of any domestic market. 

China?s domestic traffic continued on its strong growth path with an expansion of 10.1% but this was exceeded by an 11.8% rise in capacity, with load factors slipping to 80.5%. 

US March domestic traffic rose 1%, but capacity contracted 0.7%, pushing load factors to 84.3%, the highest for any market. 

Airline traffic in Brazil was affected by the timing of Carnival, which occurred in February 2012, a month earlier than in 2011. March 2012 traffic growth of 2.9% is estimated to be about half what it would have been absent the distortion. Capacity rose 9.2%, pushing the load factor down to 65.2%.   

India traffic rose 4% year-over-year, much slower than the last few months, reflecting the wider economic slowdown, while capacity climbed 4.8% and load factor was 72.2%. 

Air freight markets are now showing signs of renewed expansion. Freight Tonne Kilometers (FTKs) were over 4% higher in March than they were in the fourth quarter of 2011.  However, compared with March last year the size of the market was up just 0.3%. This is because the Chinese New Year occurred in February 2011, resulting in strong March 2011 shipments as factories reopened following the holiday period. 

Asia-Pacific and European airlines saw their freight traffic decline 3.1% and 1.9%, respectively, compared to a year ago.   

Middle Eastern carriers had a 15.1% rise in demand, the healthiest performance among the regions, with about four percentage points of that rise attributable to Arab Spring-related traffic suppression last year. Latin American carriers? traffic climbed 4.9%, while African carriers saw a 3.9% rise compared to the year-ago period. North American airlines? demand rose 1.6% year-on-year. 

Both Spain and the UK have slipped into a double dip recession in recent weeks. From April this year, the UK hiked its Air Passenger Duty (already the most expensive aviation tax in the world) by 8% which is double the inflation rate. Spain, with an economy highly dependent on tourism, is contemplating a 50% increase in charges at its two main airports (Barcelona and Madrid). 


?The goose that lays the golden eggs can only take so many knocks before she fails to produce. Even in the best of times, increasing the cost of connectivity dents competitiveness. When the economy is weak it puts at risk aviation?s ability to create jobs and growth. And in a recession it is economic nonsense,? said Tyler. Aviation supports 56.6 million jobs and $2.2 trillion of economic activity according to the latest figures from Oxford Economics.

Other News Stories (For the latest news please checkout our home page)


blog comments powered by Disqus  
Home Aviation News Aviation Stories Of Interest FAA Exam Upcoming Events Links To Other Sites General Aviation Helicopters Medical Factors Facing Pilots
Maintenance and Aircraft Mechanics Hot Air Balloon Aviation Training Handbooks Read Online Aviation History Legal Issues In Aviation Sea Planes Editorials
 ?AvStop Online Magazine                                                                 Contact Us                                                  Return To News                                          Bookmark and Share


AvStop Aviation News and Resource Online Magazine

Grab this Headline Animator