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May Air Travel: Above Pre-Recession Levels

June 29, 2010 By: George Dooley

While airlines face challenges with cost controls and capacity, the good news is that international airlines showed an 11.7 percent increase in passenger traffic and a 34.3 percent jump in freight demand compared to May 2009, the International Air Transport Association (IATA) reports. “Demand rebounded strongly in May following the impact of the European volcanic ash fiasco in April,” said Giovanni Bisignani, IATA’s director general and CEO. “Passenger traffic is now 1 percent above pre-recession levels, while the freight market is 6 percent bigger.”

North American carriers saw a 10.9 percent increase in May over the same month last year. Careful matching of capacity to demand has driven the load factor to 82.4 percent, the highest among all regions, IATA reports.

A capacity increase of 4.8 percent in May lagged behind the strong upturn in passenger demand. This pushed May’s international passenger load factor to 76 percent (78.7 percent when adjusted for seasonality). This is the sixth consecutive month with seasonally adjusted load factors near 79 percent, IATA says.

However, IATA warns that matching capacity to demand will become increasingly challenging in the coming months. Aircraft utilization remains 5 percent below pre-recession levels for single-aisle aircraft and 8 percent for longer-range twin-aisle aircraft. The 100 aircraft taken out of storage during May and 93 the new aircraft delivered globally add further capacity pressure.

European airlines recorded an 8.3 percent growth compared to May 2009, however this still puts Europe as the region with the weakest growth. Weak economic growth, questions over financial stability and sharply tightening fiscal policies will likely result in continued slower demand growth than is experienced in other parts of the world, IATA says.

Asia-Pacific carriers recorded a 13.2 percent increase in demand in May 2010 over the same month in 2009. Asia-Pacific carriers continue to drive the recovery based on robust economic growth, primarily in China.

Strong traffic growth is contributing to a strengthening industry bottom line, IATA says. Airlines are expected to post a $2.5 billion profit in 2010 in a dramatic turnaround from the $9.9 billion lost in 2009.

“This is good news, but it is only a 0.5 percent margin. We are still a long way from sustainable profitability,” said Bisignani. “In the short-term, airlines need to focus our efforts on nurturing the recovery by continuing to match capacity carefully to improving demand conditions. And everybody must control costs. This includes airports, air navigation service providers, global distribution systems and labor. There are no exceptions.”



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