IATA: Political Unrest Slows Global Growth

The political unrest in the Middle East and North Africa during February is estimated to have cut international traffic by about 1 percent the International Air Transport Association (IATA) reports and is responsible almost entirely for the slippage in passenger demand growth. February demand growth was down significantly from the revised 8.4 percent and 8.7 percent expansion recorded in January for passenger and cargo traffic respectively.

IATA said scheduled international traffic for February 2011 showed increases of 6.0 percent and 2.3 percent respectively for passenger and cargo demand compared to February 2010.

“Another series of shocks is denting the industry’s recovery from the recession. As the unrest in Egypt and Tunisia spreads across the Middle East and North Africa, demand growth across the region is taking a step back. The tragic earthquake and its aftermath in Japan will most certainly see a further dampening of demand from March. The industry fundamentals are good. But extraordinary circumstances have made the first quarter of 2011 very difficult,” said Giovanni Bisignani, IATA’s director general and CEO.

February marked a decline in load factors in both the cargo and the passenger business. February passenger load factors stood at 73.0 percent. On a seasonally adjusted basis they have lost 2.2 percentage points on peak levels as capacity additions have consistently exceeded demand growth. Freight load factors have deteriorated even faster to 51.6 percent of global capacity.

“The industry situation is volatile and we are watching higher fuel prices carefully. Capacity increases ahead of demand are bringing down load factors for both passenger and cargo operations. Demand is still supported by strong economic fundamentals. But with looser supply and demand conditions, it will be a challenge for airlines to recover the added costs of fuel. Our pathetic 1.4 percent expected margin for 2011 is under considerable pressure,” said Bisignani.

Based on an average oil price of $96 per barrel, IATA is forecasting fuel to account for 29 percent of average operating costs with a total fuel bill of $166 billion. For every dollar increase in the price of a barrel of oil, the industry must recover an additional $1.6 billion in added costs.

International Passenger Traffic
• By February 2011, air travel volumes were 16 percent higher compared to the low point reached in early 2009 and some 5 percent above the pre-recession peak of early 2008.

Europe’s carriers recorded 7.4 percent growth compared to February 2010 against a 9.8 percent increase in capacity. This was slower than the 7.9 percent demand growth reported for January showing the impact of fall off in trans-Mediterranean traffic to North Africa due to the unrest in the region.

• North American airlines reported 6.7 percent year-on-year growth for February and a capacity expansion of 11.9 percent. In recent months, the region’s airlines have seen dampened demand due to several factors starting with disruptive winter conditions in December and January, followed by political unrest last month in the Middle East and North Africa. As a result, there is a widening gap between supply and demand pushing the load factor down to 71.7 percent, significantly below the 82.2 percent recorded for the full year in 2010.

Asia-Pacific airlines reported a major slowdown to 3.0 percent growth, half of the 6.3 percent recorded for January. A capacity increase of 6.6 percent pushed the load factor down to 75.4 percent. Chinese New Year fell at the beginning of February, pushing some of the holiday traffic into late January.

• Middle East airlines saw demand growth fall from 12.0 percent in January to 8.4 percent in February. A capacity increase of 11.0 percent[ resulted in a load factor of 72.2 percent. Political unrest in Bahrain, Yemen and Syria is expected to have an impact on the region’s markets in March. These three countries represent about 6 percent of Middle Eastern traffic and 0.3 percent of global capacity.

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