North American airlines saw passenger demand expand by 1.6% in April compared to the previous year. This is the weakest demand growth among all regions and represents a weakening from the 5.3% year-on-year growth recorded in March. However, the trend in North American travel is still positive since the end of 2011, as US economic conditions and particularly consumer confidence has improved. North American carriers were also the only region to cut capacity (by an almost equal 1.5%). This allowed the region’s carriers to post the strongest load factors at 80.8%.
Middle East airlines’ traffic growth has started to pick up pace again, recording a 16.0% gain in passenger demand for April, after having softened in the second half of 2011. Although this is a fall from the 20.9% growth recorded in March, the March result was distorted by the impacts of the Arab Spring in 2011. Furthermore, demand did grow faster than the 12.7% capacity expansion in April and load factors remained high at 78.3%.
Latin American carriers experienced a 9.0% expansion in international demand in April compared to the same month in 2011. Despite some potential for economic slowdown, growth has been solid enough in the region’s economies to sustain strong demand for passenger travel. This outpaced the capacity expansion of 5.3% and bucked expectations of a slowdown in the region due to weakening economic conditions. Load factors stood at 78.6%.
African airlines reported a 7.0% increase in demand. It was the only region where capacity expansion (8.5%) outpaced demand growth. Load factors were the weakest at 65.9%.
Domestic Passenger Markets
Domestic markets grew at about half the rate of international markets, just 3.9%. Load factors of 79.7% were slightly higher than on international routes (79.1%).
- Japan experienced the strongest traffic growth, up 27.8% year-on-year. This, however, reflects the devastating impact on year-ago traffic of the natural disasters of March 2011. While the market has significantly recovered, domestic traffic levels remain 8% below pre-earthquake and tsunami levels. Load factors of 57% are the lowest among major domestic markets.
- China’s domestic demand reflected the slowdown seen more broadly across the Chinese economy. The 6.3% growth recorded in April was the lowest recorded since early 2011 and well behind the 10.1% growth reported in March. The result reflects the slowdown seen in the economy more widely. Load factors of 82.2%, nonetheless, were high.
- US domestic markets grew by 1.0% in April while capacity contracted by 0.7%. Load factors were the highest at 83.6%.
- Passenger demand in Brazil grew by just 2.0%, below the 4.5% capacity expansion. Load factors stood at 70.2%.
- India traffic rose by 8.6% year-over-year, ahead of the 1.7% capacity expansion. Load factors stood at 75.3%.
Air Freight (Domestic and International)
- Air freight markets, while weak, are now showing some signs of expansion after bottoming out toward the end of 2011.
- Asia-Pacific carriers saw a 7.3% decline in demand in April, well ahead of capacity cuts of 4.1%. This reflects weakening exports from China. European airlines saw a 4.9% fall in cargo traffic compared to the year before, despite having cut capacity by 0.2%. North American carriers showed a 6.4% drop in demand with a 2.9% cut in capacity. Latin American carriers recorded a 3.6% fall in demand even though capacity expanded by 8.8% compared to April 2011.
- Middle Eastern carriers were the bright spot in cargo with a 14.5% increase in demand. But this was behind a 15.1% increase in capacity. African carriers showed a 6.1% increase in demand, behind a 9.0% increase in capacity.
The Bottom Line
“The growth in passenger markets is encouraging. But it comes against an environment of continuing high oil prices and growing economic uncertainty. So translating the stronger demand into profits will be difficult,” said Tyler.
Air Cargo Basically Flat