International Air Demand Recovery Is Strong

In March, international scheduled air traffic showed continued strengthening of demand, the International Air Transport Association (IATA) reports. Compared to March 2009, passenger demand was up 10.3 percent— an improvement from the 9 percent growth recorded in February. These are strong gains, IATA says, but the data is being compared to March 2009, which was the low point for international air travel during the recession.

“March results show that the pace of the upturn is strong. But the trauma of the recession is not over,” said Giovanni Bisignani, IATA’s director general and CEO. “The industry has lost two years of growth, and passenger and freight markets are still 1 percent below early 2008 highs. Nonetheless, the pace of improvement, based on an improving global economic situation, is much faster than anybody would have expected even six months ago.”

IATA noted that the International Monetary Fund revised global GDP growth forecasts from 3 percent to 4.3 percent for 2010. With a 78.0 percent load factor recorded in March, passenger load factors remain at record highs. While demand expanded by 10.3 percent in March, capacity increases stood at 2 percent, boosting the load factor and creating much tighter supply and demand conditions. Global capacity remains 3-4 percent below pre-crisis levels.

Regional demand patterns continue to reflect the asymmetrical nature of the economic rebound.  North American carriers posted a traffic growth of 7.8 percent, lagging the global average, although considerably improved from the 4.4 percent recorded in February. “Uncertainty over government budget cuts and tax increases is dampening demand for air travel, compared to other regions, particularly Asia-Pacific” IATA reports. “North American carriers posted the highest load factor among the regions (81.6 percent) as a result of continuing careful capacity management.”

The strong traffic recovery is expected to show a dip in April as a result of the eruption of an Icelandic volcano in April that saw the shutdown of large portions of European airspace over a six-day period. “European carriers were already showing the weakest recovery from the financial crisis through March,” said Bisignani. “The volcanic ash crisis hit the weakest part of the industry the hardest. The majority of the $1.7 billion in lost revenues was by Europe’s carriers. Passenger confidence is not affected and we expect a quick rebound. The combined impact of lost business and added costs will certainly hit the bottom line.”