IATA: Demand Growth Slows

Global airline traffic results for May are showing a general downward trend in line with deteriorating global economic conditions, the International Air Transport Association (IATA) reports. IATA also estimates that about 15,000 athletes, over 20,000 media and many more spectators will converge on London to watch the Olympics and some 600 million people are expected to fly over the months of July and August. 

While passenger demand was 4.5 percent ahead of levels in May 2011, growth was virtually flat compared to April. Capacity increased by 4.0 percent and load factors stood at 77.6 percent, IATA says. below the historically high levels recorded in April.

“The airline industry is fragile. Relief in oil prices provides some good news. Unfortunately, the softness in oil markets comes on the back of fears of deterioration in the European economy. Business and consumer confidence are falling. And we are seeing the first signs of that in slowing demand and softer load factors. This does not bode well for industry profitability. Airlines are expected to return a $3 billion profit in 2012 on $631 billion in revenues. That’s a razor-thin 0.5 percent margin,” said Tony Tyler, IATA’s director general and CEO.

International passenger demand was up 5.6 percent compared to May 2011. That is well below the 7.1 percent growth recorded in April. All regions, except the Middle East, saw growth in passenger demand slow in May compared to April. A 4.1 percent capacity expansion, however, helped improve load factors from 75.9 percent in May 2011 to 77.0 percent for the current month.

European carriers posted 4.1 percent growth on international services when compared to the previous May. This is significantly below the 5.7 percent year-on-year growth recorded for April. The region’s load factor of 78.5 percent was 1.5 percentage points ahead of the global average. Traffic growth for European carriers basically stopped at the end of 2011. Since the beginning of 2012, the growth trend has been basically flat, in line with the economic pessimism throughout the continent, IATA reports.

North American airlines experienced a 1.5 percent increase on international demand in May compared to the previous year. This is below but relatively unchanged from the 1.6 percent year-on-year growth recorded in April. Load factors for the region’s carriers averaged 82.1 percent for the month, the highest among the regions. This reflects the tight capacity management conditions which are supporting the recent upward revision of profitability prospects to $1.4 billion (slightly ahead of the $1.3 billion that the region’s carriers made in 2011).

Domestic markets grew at slightly less than half the rate of international markets, just 2.7 percent. US domestic demand slipped 0.1percent in May while capacity rose by 0.3 percent. Load factors dipped slightly to 84.3 percent, still the highest among all the domestic markets. IATA estimates that about 15,000 athletes, over 20,000 media and many more spectators will converge on London to watch the Olympics and  some 600 million people are expected to fly over the months of July and August. 

Visit www.IATA.org

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