Ups ’n’ Downs

IATA says that implementing the Single European Sky, delivering NextGen air traffic control in the US and supporting the commercialisation of sustainable aviation biofuels are examples of government action that would generate jobs, improve environmental performance and help secure the industry’s long-term success. (BAE Systems)

IATA’s latest traffic results show a further decline in the airfreight market, though passenger traffic is up. Tom Allett reports.

IATA says that implementing the Single European Sky, delivering NextGen air traffic control in the US and supporting the commercialisation of sustainable aviation biofuels are examples of government action that would generate jobs, improve environmental performance and help secure the industry’s long-term success. (BAE Systems)

The International Air Transport Association (IATA) announced its global traffic results for October on November 28.  Cargo demand was recorded as being 4.7% below that of October 2010 while passenger traffic showed a 3.6% rise over the previous year’s levels.
Commenting on the figures, IATA’s Director General and CEO Tony Tyler said: “Cargo is the story of the month.  Since mid-year the market has shrunk by almost 5% and this is far greater than the 1% fall in world trade.
“Air freight is among the first sectors to suffer when business confidence declines.”
IATA says that while business confidence has dropped off considerably in recent months, industrial output has not – though, in anticipation of weaker economic activity, there is a “shift to cheaper and slower modes of transport.”
It adds that: “In stark contrast to the decline in air freight, the trend for air travel remains upwards, but with very strong regional differences.”
Mr Tyler says that despite the deepening Euro-zone crisis, IATA’s statistics show that European carriers have showed above-trend demand growth of 6.4%, adding that: “with Europe accounting for 29.2% of global air travel, this suggests that the current overall strength in air travel is based on fragile foundations.”
 
International Passenger Markets
IATA’s figures reveal that international air travel showed 4.6% growth over October 2010.  This is in line with an overall upward trend, albeit at a slowing pace.  International passenger load factors stood at 77.6%, down from the 79.5% recorded at the same time last year.  North American airlines saw international passenger traffic decline by 1.9% while capacity was almost the same levels compared to the previous October.  IATA says that one of the main drivers for the decline in traffic is capacity cuts by US carriers.  International load factors stood at 80.1%, second only to Europe at 80.2%.
Meanwhile, IATA’s statistics show that European carriers reported a 6.4% increase in international passenger traffic, below the 8.1% increase in capacity.  The load factor of 80.2% was the highest amongst the regions.  Half of all growth in capacity and traffic carried on international markets over the past year has been generated by European airlines, says IATA.
Despite the euro-zone crisis, the North Atlantic and intra-European passenger segments have been the strongest performers over the past year and IATA believes that the driver of this performance is most likely business-related travel generated by the strong export performance of the Northern European economies.
Asia-Pacific carriers reported a 3.8% increase in demand against a 7.5% capacity expansion resulting in a load factor of 75.2%.  While Asia-Pacific airlines benefitted from the fast growth of Asian exports in the immediate post-recession recovery, in the past year, European exporters took the lead in export growth on the back of a weak Euro.  This, says IATA, is one of the causes of the relatively weaker performance of Asia-Pacific carriers compared to their European counterparts.
Middle Eastern airlines reported the strongest growth in demand (7.7%) against a capacity increase of 9.5%.  Their load factors stood at 74.8%.
The figures for Latin America’s carriers showed the strongest capacity growth (10.4%) with an increase in demand of 6.7% while load factors stood at 76.8%.  IATA says that when these figures are looked at in terms of year-to-date performance, the 10.5% demand growth recorded by Latin American airlines remains the strongest, followed by Europe (9.9%) and the Middle East (8.5%).
Airlines based on the African continent reported a 4.2% increase in demand, which was below their 5.9% growth in capacity.  Load factors were the weakest amongst the world’s regions at 68.2%.
 
Domestic Passenger Markets
Overall, domestic passenger markets grew by 2.0% compared to October 2010, though capacity growth in the domestic markets was greater, showing a 2.4% increase over the previous year.  IATA says this is in line with the long-term growth trend for domestic markets of 2.0%, but adds, “it is well below the 8.0% growth experienced during the post-recession recovery.”
US airlines cut capacity on domestic markets by 1.1% and what it described as weak consumer confidence saw demand decline by 0.9%.  US airlines reported strong load factors of 83.6%.
IATA’s Director General and CEO, Tony Tyler. (IATA)

India recorded the strongest growth in demand (11.0%), but IATA notes that this is down on the 17.1% year-to-date growth and well below the 16.6% capacity expansion.  Its airlines’ load factors stood at 73.8%.
Brazilian domestic growth has slowed to 6.4%, below the 15.1% year-to-date growth.  Load factors recorded were the weakest, at 66.9%.
Japanese domestic traffic has not yet recovered from the impact of the disastrous March earthquake and tsunami.  The statistics show that October’s demand was 10.0% down on previous year levels while capacity had been cut by 8.8%.  IATA says that while the Japanese market has regained ground from the aftermath of the initial tragedy, which saw demand fall by more than a quarter, demand remains 7% below February levels.
Chinese domestic traffic is recorded as having grown by 8.4% over 2010 levels, slightly below the capacity expansion of 8.8%, while load factors stood at 83.1%.  This, says IATA, is an increase of 8 percentage points in the utilisation levels achieved only three years ago, and has played an important role in improving the profitability of Chinese airlines.
 
Air Freight (Domestic & International)
IATA believes that the confidence of purchasing managers in the manufacturing sector has fallen to its lowest level since 2009.  It says that this loss of confidence appears to have caused shippers to switch some transport needs to slower and cheaper sea options to the detriment of air freight which showed a 4.7% decline in October compared to the previous year.
Airlines have responded to weaker demand by cutting their freighter fleet, but this has not stopped a steady and substantial five percentage point fall in freight load factors compared to their early 2010 peak, owing to capacity entering the market via wide-bodied passenger aircraft.
Asia-Pacific carriers account for about 40% of global freight markets and while IATA says that they are the most exposed to the volatility of freight volumes, they are still benefiting from the dominance of trade flows to Asia.  In October IATA’s figures show that they posted the highest freight load factor (58.8%) –12.3 percentage points above the global average of 46.5%.  This is a result of strong outward flows of freight from Asia which dominates the air cargo business.
 
The Editor’s View
Mr Tyler is urging policy makers to reflect on aviation’s significant social and economic benefits and noted that aviation supports 33 million jobs and that trillions of dollars of economic activity are supported by air transport’s connectivity.  IATA predicts that this year more than 2.8 billion people and 46 million tonnes of cargo are expected to be transported by safe and efficient air links.
“The economic prospects for 2012 are uncertain, but the track record of aviation’s ability to act as a catalyst for economic activity is rock-solid.  Now is the time for governments to use aviation strategically in their efforts to put economies back on track,” he said.
Tony Tyler is absolutely right and his words are an accurate reflection of what the industry already knows; sadly, from a British perspective, it’s a requirement that seems to be lost on the British Government, which recently announced another big hike in its damaging Air Passenger Duty (APD) tax.  This has delivered yet another serious blow to all airlines operating to and from the UK, the airports they serve and the wider British economy.