It’s unfair that air travelers should suffer the impact of sequestration given that airlines and passengers already pay around $4.5 billion a year in fees and taxes for the essential services of border control and airport security, says Tony Tyler, director general and CEO of the International Air Transport Association (IATA).
"It is unlikely that the savings that will be achieved from sequestration will offset the damage to the economy if air travel is discouraged by these cutbacks. Aviation is an important catalyst for economic growth and prosperity. The cost of the shocks, uncertainty and unpleasant surprises can only hamper efforts to revive the economy. The government’s priority should be on extracting the greatest economic benefit possible from aviation—not making it more difficult to do business,” said Tyler.
Tyler's remarks came as IATA reported global passenger traffic results for February showing that demand growth is accelerating on the back of stronger business confidence, particularly in emerging regions. Passenger demand rose 3.7 percent compared to February 2012.
The 3.7 percent growth masks improvements in recent months, IATA said. October 2012 appears to have been a turning point for air travel markets. Since October, passenger demand has been growing at an annualized rate of 9 percent. This is almost double the growth trend over the first 9 months of 2012, IATA reports.
“February’s performance was good news. Demand for air travel continues to rise on economic optimism and improved business confidence. But that comes with a few caveats. Much of the growth is concentrated on emerging markets. Europe continues to be a laggard. And the handling of the banking crisis in Cyprus has reminded all of us that the deep problems in the Eurozone economies still remain,” said Tyler.
Capacity was up 1.0 percent on the previous February and the industry load factor stood at 77.1 percent. “Airlines are carefully managing capacity expansion, which is keeping the load factor at a record high. This is helping the industry to remain profitable despite persistently high oil prices.”
On March 20, IATA notes it raised its outlook for the industry’s earnings performance to a net profit margin of 1.6 percent from 1.3 percent. “The industry’s fortunes appear to be moving in the right direction. But the margins are wafer thin. And any shock—the continuing Eurozone crisis or budget sequestration in the U.S.—could negatively impact the outlook,” said Tyler.
Budget sequestration measures began to take effect April 1, IATA said. "Alongside the economic impact of uncertainty and reduced government spending, operational concerns are significant. Passengers in the US could face flight delays and even longer lines then usual at security and border control."
February international passenger demand was up 3.6 percent compared to the year-ago period, and 0.9 percent compared to January. Capacity rose 1.1 percent versus February 2012 and load factor climbed 1.8 percentage points to 76.3 percent.
North American airlines’ international traffic rose just 0.3 percent in February compared to February 2012; however this doesn’t reflect the significant underlying growth trend over recent months. International revenue passenger kilometers for North America are up 3 percent in February compared to October. The load factor rose to 76 percent, reflecting a 4.6 percent reduction in capacity year-on-year.
Domestically, US traffic dipped 0.6 percent in February while capacity dropped 2.5 percent, pushing load factor up to 80.4 percent second highest among the domestic markets. As with international traffic, the year-on-year growth rate is masking a recent uptick in the growth trend. The US market has been growing at an annualized rate of 9 percent since the fourth quarter of 2012, IATA says.
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