Air Travel Sees Decline in March

The promised recovery in air travel sharply decelerated in March with the global industry losing 2 percentage points of demand as a result of the earthquake and tsunami in Japan and the political unrest in the Middle East and North Africa, reported Giovanni Bisignani, director general and CEO, the International Air Transport Association (IATA).

Year-on-year growth in passenger demand slowed to 3.8 percent from the 5.8 percent recorded in February, with global passenger demand falling by 0.3 percent in March. Conversely, year-on-year growth in freight markets rebounded to 3.7 percent in March from the 1.8 percent recorded in February. Compared to February, global passenger demand fell by 0.3 percent in March, while cargo demand expanded by 4.5 percent.

IATA said that the impact of the events in Japan on global international traffic constituted a 1 percent loss of traffic in March. Looked at regionally, Asia-Pacific carriers saw a traffic loss of more than 2 percent; North American carriers had a 1 percent drop and Europe’s carriers saw a 0.5 percent fall. Japan’s domestic market was the most severely impacted, with a 22 percent fall in demand.

Bisignani warned that the next challenge to the airline industry would be the price of oil.

“The big uncertainty is the price of oil … many leisure travelers are putting off flying because of the impact of high oil prices. The fragility of the situation is demonstrated by the considerably weaker 3.3 percent year-on-year growth in economy class travel in February. And, despite efficiency gains, the industry’s 1.4 percent profit margin leaves it vulnerable in the face of volatile markets,” said Bisignani.

The disruptions in the Middle East and North Africa cut international travel by 0.9 percentage points, IATA said. Egypt and Tunisia experienced traffic levels that were 10 to 25 percent below normal for March. Military action in Libya virtually stopped civil aviation to, from and within that country, IATA said.

Capacity adjustments lagged behind the sudden drop in demand, IATA said. Against global demand growth of 3.8 percent, capacity expanded by 8.6 percent. The average load factor fell by 3.5 percentage points to 74.6 percent.

Europe’s carriers saw demand levels of 5.3 percent above March 2010. This was down from the 7.4 percent year-on-year growth in February. Compared to February levels, Europe’s carriers added 0.5 percent to capacity but experienced zero demand growth. This pushed load factors down by 0.3 percentage points to 75.3 percent. Long-haul business travel is strong (except to Japan) but weak economic prospects continued to dampen intra-European traffic.

North American carriers saw a 3.7 percent year-on-year improvement in demand in March. This was a 3 percentage point tumble from the 6.7 percent growth recorded in February. Compared to February levels, demand dropped 0.9 percent while capacity was up 0.3 percent. This led to a 0.9 percentage point drop in load factors from their February levels to 76.9 percent.

Asia-Pacific carriers saw the broadest negative turn of fortunes in March. Compared to the previous year passenger demand was flat. Compared to February however demand contracted by 2.2 percent while 0.8 percent was added to capacity. This led to a sharp 2.3 percentage point fall in load factors to 74.2 percent in March.

Latin American carriers experienced a 22.2 percent increase in demand compared to the previous March which was severely depressed due to the earthquake in Chile. Middle East carriers saw year-on-year demand growth fall from 8.3 percent in February to 5.6 percent in March. Compared to the previous month (February) demand was up by 0.1 percent. African carriers saw demand fall 7 percent compared to the previous March. This is an improvement from the 9.7 percent drop recorded in February. Compared to the previous month, the region saw demand expand by 6.5 percent against an increase in capacity of 6.2 percent.

Looking ahead, IATA said the second quarter is likely to see continued depressed air travel markets due to the events in Japan and in the Middle East and North Africa. However, strong underlining economic growth trends should support recovery in both passenger and cargo markets in the second half of 2011.