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IATA Reports Slower Growth In August

September 28, 2010 By: Staff

The International Air Transport Association (IATA) reports international scheduled traffic results for August showing year-on-year increases of 6.4 percent for passenger and 19.6 percent for cargo. August demand is down from the 9.5 percent (revised) increase recorded for passenger and 23 percent growth in cargo recorded in July.

IATA said 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 percent and cargo by 0.8 percent compared to July.

“The rapid improvements in demand that we saw earlier this year are behind us. The slow down 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, IATA reports. Since December 2009, air travel volumes have expanded by 4.3 percent while capacity has risen by 6 percent. Passenger load factors remain high (81.6 percent), but when adjusted for seasonal fluctuation this amounts to a drop of 1.5 percentage points compared to the February 2010 peak.

North American carriers recorded a 5.3 percent improvement compared to the previous August. This is a similar pattern to Europe’s carriers with most of the demand improvement having materialized during 2010 and coinciding with a weakening of the U.S. dollar enticing inbound leisure travel and stronger business travel in both directions, IATA says.

Slower growth is consistent with IATA’s recently revised global industry outlook, IATA says. 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 percent. 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.



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