Montreal — The International Air Transport Association (IATA) announced international scheduled traffic results for August indicating year-on-year increases of a 6.4% for passenger and 19.6% for cargo.
August demand is down from the 9.5% (revised) increase recorded for passenger and 23.0% growth in cargo recorded in July.
The August 2010 data is partially distorted by the comparison to August 2009, by which time markets were already expanding rapidly in a post-recession rebound. When adjusted for seasonality, traffic volumes for passenger traffic fell by 1.0% and cargo by 0.8% compared to July.
“The rapid improvements in demand that we saw earlier this year are behind us. The slowdown of demand in August is consistent with our forecast for a tougher end to 2010 as government stimulus monies run out without having generated significant improvements in employment. The bounce from re-stocking is over. We do not yet see the strong consumer confidence needed to sustain the expansion with spending,” said Giovanni Bisignani, IATA’s Director General and CEO.
Capacity increases in passenger markets are accelerating. Since December 2009, air travel volumes have expanded by 4.3% while capacity has risen by 6%. Passenger load factors remain high (81.6%), but when adjusted for seasonal fluctuation this amounts to a drop of 1.5 percentage points compared to the February 2010 peak.
Freight capacity is matching demand trends which are stabilising. Since December 2009, the freight volume expansion of 9.2% has been matched by capacity expansion. After a rapid improvement throughout 2009, freight load factors have levelled off at 51.0%.
Global passenger traffic in August was 2% above pre-recession levels of early 2008.
Asia-Pacific carriers recorded a demand increase of 6.2%. While this is still a comparatively strong performance, the region’s airlines carried a similar seasonally adjusted volume of traffic in August as they did in January indicating a levelling off of the strong gains recorded throughout 2009.
European carriers recorded a 5% growth in demand for August when compared to the previous year. Most of the growth that is supporting August’s 5% year-on-year expansion has come during 2010. Demand improvements are being supported by inbound traffic on the back of the weak Euro. Business travel has also been given a boost by a revival in exports.
North American carriers recorded a 5.3% improvement compared to the previous August. This is a similar pattern to Europe’s carriers with most of the demand improvement having materialised during 2010 and coinciding with a weakening of the US dollar enticing inbound leisure travel and stronger business travel in both directions.
Latin American carriers saw the largest dip in demand growth — from 15% in July to 8.7% in August. The bankruptcy of Mexicana airlines affected about 1 million passengers and slightly distorted these numbers. Nonetheless, passenger demand in Latin America has leveled-off in 2010 after robust growth in 2009.
Middle East carriers recorded demand that was 12.3% ahead of August 2009 levels. This is down from the 16.5% recorded for July. The shifting of Ramadan into August is partially responsible for the slowdown. It was the only region in which capacity expansion of 13.0% outstripped demand.
Africa’s carriers recorded growth of 10.8% slightly ahead of a capacity expansion of 9.0%. Economies in this region are still delivering robust growth. This is helping to generate further growth in business travel in the region, which is supporting the growth of African airlines passenger business.
Global international cargo traffic in August was 3% above the pre-recession levels of early 2008.
During the first quarter, air freight grew at an annualised rate of 25%. The first two months of the third quarter recorded annualised growth of 12%. With the restocking phase of the inventory cycle now complete growth rates are shifting back towards trend growth in world trade of around 6%. Freight markets are still growing but at a significantly slower pace.
The patterns of recovery are shifting. Freight volumes carried by Asian carriers have increased by 3.8% since January while European and North American carriers have seen a 6-8% expansion over the same period. Several drivers are contributing to this shift. Weaker currencies in the US and Europe are supporting export growth and improving the competitiveness of US and European carriers. Another contributor may be the fall in import activity in Europe and the US dampening the demand for finished goods manufactured in Asia. Asian carriers are the largest participants in global cargo markets with a market share of 44%. Consequently they are disproportionately affected by any trend — upwards or downward.
Slower growth is consistent with IATA’s recently revised global industry outlook. The industry is expected to post a profit of $8.9 billion (up from the June forecast of $2.5 billion) based on an exceptionally strong first half of the year. The slower demand growth in the second half is expected to continue into 2011. But with capacity increasing faster than demand, yields are not expected to grow. With a much tougher revenue environment, expectations are for a significantly reduced profit of $5.3 billion in 2011.
“On $560 billion in industry revenue, our margins are just 1.6%. Having a bigger black number on the bottom line is good. But we must also be realistic in understanding that the profitability is fragile. And the August results are a reminder that as we move into 2011, we are expecting a more challenging revenue environment,” said Bisignani.
The August traffic report comes as aviation leaders gather in Montreal for the Triennial Assembly of the International Civil Aviation Organisation (ICAO). Climate change is topping the agenda for participants. The air transport industry is united in calling on governments to agree a global solution for managing aviation’s carbon emissions under the leadership of ICAO and in line with the industry’s ambitious targets.
Airlines, airports, air navigation service providers, manufacturers and aircraft operators have agreed to (1) improve fuel efficiency by 1.5% annually to 2020, (2) cap net emissions from 2020 with carbon-neutral growth and (3) cut net emissions in half by 2050 compared to 2005 levels. “The entire aviation is united in asking governments not to miss the opportunity of this Assembly to agree on a global solution to manage aviation’s carbon emissions in time for the UNFCCC meeting in Cancun this December. Some major political blockers have been removed and a growing number of countries are supporting the industry targets as the way forward. Reaching consensus among the 190 ICAO contracting states will be hard work. The industry is here to support the Assembly’s success and a responsible solution for this important issue,” said Bisignani.