Air transport markets weaken in November
The International Air Transport Association (IATA) announced global traffic results for November showing a softening in passenger markets while air cargo markets remained weak compared to levels attained earlier in the year.
As for passenger traffic, the association said it was 4.3 per cent above November 2010 levels but this is skewed as November 2010 was a particularly weak month. The softening in passenger markets becomes apparent when compared to the previous month (October 2011). This shows a 0.5 per cent decline on a seasonally-adjusted basis.
Freight markets were 3.1 per cent below November 2010 levels despite a 1.1 per cent increase on October 2011 performance.
"Weak global economic performance is being reflected in air transport markets. Freight markets have contracted some 4 per cent compared to January. Although passenger markets have had some growth relative to the beginning of the year âê" about two per cent âê" the trend has been both soft and volatile. Continuing economic uncertainty will likely mean market shortcomings deepening as we enter 2012," said Tony Tyler, IATA's director general and CEO.
Globally, passenger load factors have fallen sharply to 76.3 per cent from 78.5 per cent in October. Regional differences are sharp. While North American carriers saw a 0.8 per cent decline in travel, carriers in the Middle East experienced a 10.1 per cent increase, followed by nine per cent for Latin American airlines.
International travel markets continue to be weaker than domestic markets. Compared to October, international demand contracted by 1.5 per cent while domestic demand grew by 1.3 per cent.
According to the report, Latin American and the Middle Eastern carriers recorded the strongest year-on-year growth at 8.8 per cent and 9.8 per cent respectively. For both regions, capacity increases outstripped the growth in demand with Middle Eastern carriers growing their capacity by 10.4 per cent and Latin American carriers by 11.4 per cent. Middle Eastern airlines have seen a gain in market share on long-haul markets through price competitive products.
European airlines continued to face the weakest market outlook due to the uncertainty in the euro-zone. Demand grew 4.9 per cent compared to the previous November while capacity increased by 5.3 per cent. This is a steep change from the 6.4 per cent demand growth recorded for October on a capacity increase of 8.1 per cent. Growth in travel has been supported by business travel on the back of export strength in economies such as Germany.
African carriers reported 2.6 per cent growth in demand. While this is twice the 1.3 per cent capacity expansion, the region still recorded the weakest load factors of 66.2 per cent.
Overall domestic performance was better than that of international markets with 4.7 per cent year-on-year growth in November and an average load factor of 79.2 per cent. Sharp differences remained between the major markets.
The post-earthquake and tsunami recovery in the Japanese market stagnated in November. Demand was 10.7 per cent below levels attained in the previous year. Despite capacity cuts of nine per cent, Japan still recorded the weakest domestic load factor at 65.4 per cent.
Air freight markets continued their decline in line with weak economic performance and falling business confidence. International markets declined by 3.8 per cent. This was offset by 2.0 per cent growth in domestic markets. Nonetheless, system wide demand shrank by 3.1 per cent in comparison with November 2010.
International freight load factors have declined six percentage points from their peak in mid-2010. While freighter capacity has been adjusted to meet demand, belly cargo capacity follows the trend in passenger demand.
The Middle East and Latin American carriers delivered the strongest cargo performance with 4.6 per cent and four per cent growth respectively.
African carriers reported a 1.7 per cent year-on-year decline.
"The year-end holiday season reminds us all of the importance of connectivity and how aviation is a force for good in the world. Global supply chains bring holiday goods to markets. Millions of people are reunited with family and friends. Millions more embark on journeys of discovery or rest and relaxation. Early in the New Year they will be joined by business travelers seeking to grow their businesses by exploring new market opportunities," said Tyler.
"This year the story of aviation's importance is even more compelling as governments around the world seek solutions to economic uncertainty. Economic growth is the only durable solution. Aviation can be a catalyst for that growth. But that depends on governments allowing airlines to get on with the business of providing global connectivity. The New Year's resolution for every government with respect to aviation should be to stop over-taxation or misregulation of this vital economic driver," said Tyler.
IATA is estimating the airline industry will make a collective profit of $6.9 billion in 2011 for a net margin of 1.2 per cent. IATA forecasts that this will fall to $3.5 billion in 2012 (0.6 per cent net margin). But the association has warned that the downside risk of the Euro-zone crisis failing to be resolved could lead to losses in excess of $8 billion.