Airline Demand Grows in May, Despite Risks

Airline results for May 2011 showed a 6.8 percent increase in passenger traffic over May 2010 and 4 percent higher than the beginning of the year, the International Air Transport Association (IATA) reports.

“We saw positive developments for the air transport volumes in May. International passenger load factors rebounded by 0.8 percentage points to 75.8 percent. Freight volumes improved by 1.2 percent over April and passenger volumes were up by 1.8, percent. These will help to alleviate some of the pressure on profits from continued high fuel prices,” said Giovanni Bisignani, IATA’s Director General and CEO.

“But there are risks associated with political unrest in the Middle East and the European currency crisis. We still expect the industry to make $4 billion this year. That is a pathetic 0.7 percent margin and another shock could alter the industry’s fortunes dramatically. It’s another tough year for a very fragile industry,” said Bisignani.

North American carriers have cut capacity for two consecutive months (-0.4 percent in April and -0.5 percent in May). Year-on-year, traffic is up 4.5 percent and capacity increased by 5.5 percent. This cautious approach to capacity expansion resulted in the highest load factor (81.8 percent ) among the major regions, IATA said.

African airlines’ international traffic increased 1.1 percent over the previous year. Travel markets to the region had been depressed by the impact of political unrest in Egypt and Tunisia. Flights to these two destinations are still about 20 percent down. However a significant 2.2 percentage point improvement in the load factor for the month does show initial signs of improvement.

Asia-Pacific carriers recorded an expansion of 4.7 percent, considerably below the global average of 8.0 percent. This is due to continuing weakness in the post-earthquake/tsunami Japanese market. Compared to May 2010, capacity expanded 5.0 percent and the load factor fell slightly to 73.4 percent.

European carriers’ traffic expanded by 10.9 percent boosted by increased northern European economic activity and a weaker Euro encouraging trade and inbound travel. Capacity expanded by 10.6 percent, second only to Latin America, and the load factor strengthened to 77.7 percent.

Latin American carriers saw the fastest international growth, up 21.3 percent compared to May 2010, and the fastest capacity expansion (15.2 percent ). This is a consequence of strong economic growth and increased travel and trade flows to North America and across the Pacific. The load factor is just above the industry average at 76 percent.

Middle East carriers grew international traffic by 7.8 percent over May 2010, slightly below a 9.6 percent capacity expansion that saw load factors slip to 70.8 percent. While political unrest continues to have a dramatic impact on several of the region’s smaller markets, the overall impact on the region’s carriers is very limited.

Domestic traffic was also impacted, IATA reports. Japanese domestic demand was 29.9 percent below May 2010 while capacity has been adjusted downwards by 20.8 percent. Total volumes in May were 4.4 percent higher than in April, showing the initial signs of recovery from the earthquake and tsunami. But the low 54.7 percent load factor indicates the continuing mismatch between supply and demand.

The mature U.S. domestic air travel demand grew by 4.0 percent compared to the previous May. Against a 1.5 percent increase in capacity, load factors were pushed to 84.6 percent--the highest among domestic markets surveyed, IATA said.


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