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
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
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
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
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).
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