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 Passenger Markets
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 (Domestic and International)
- 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.
The Bottom Line
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.
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Notes for Editors:
Air Cargo Basically Flat