Emerging markets lead IATA passenger traffic results
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Emerging markets lead IATA passenger traffic results

Emerging markets lead IATA passenger traffic results

The International Air Transport Association (IATA) has announced global passenger traffic results for May, which shows that air travel has continued to expand. This growth was led by emerging markets.

    Compared to May 2012, the overall demand has risen by 5.6 per cent, while passenger capacity climbed to 5.2 per cent, pushing the passenger load factor up by 0.3 percentage points to 78.1 per cent.
    "Global economic performance remains a concern; however, the demand for air travel continues to expand," said Tony Tyler, IATA's Director General and CEO. "The primary driver is the growing demand for connectivity to emerging markets. The business environment has also improved, compared to mid-2012, with some indications of easing weakness in the Eurozone. It's still a tough environment, but there are some reasons for optimism in the second half of the year."

    International Passenger Markets


    International passenger demand rose by 5.7 per cent in May, compared to the same period last year, but with a rise in passenger capacity by 5.6 per cent. The passenger load factor was flat at 77.0 per cent. The strongest growth occurred in the emerging markets of Africa, Latin America and the Middle East.
    •Middle East carriers had the strongest year-on-year traffic growth for any region at 11.7 per cent. But with passenger capacity up by 12.8 per cent, the passenger load factor declined to 73.5 per cent by 0.7 percentage points. The demand for air travel in the Middle East and Africa has benefitted from continued expansion in trade volumes, since the late 2011.
    •European carriers recorded a 5.6 per cent growth on international services, compared to May 2012. The underlying growth trend has also picked up, suggesting that improving consumer and business confidence in Europe would mean stronger growth in air travel demand. With passenger capacity growth of 4.4 per cent, the passenger load factor climbed up by 0.9 percentage points to 79.1 per cent; the second highest among the regions.
    •Asia-Pacific airlines' international traffic rose by 3.7 per cent in May, compared to the year-ago period, but this was more than offset by a 5.5 per cent rise in passenger capacity, with the result that the passenger load factor slipped by 1.3 percentage points to 74.1 per cent. This softness in demand is consistent with the falls in business confidence in major Asian economies, including a slowdown in the trade growth momentum. In particular, the GDP growth of China did not meet the required expectations in the first quarter and business confidence has slipped to levels indicating a contraction in manufacturing activity.
    •North American airlines' international traffic climbed to 3.0 per cent in May versus May 2012. This was the slowest rise among the regions, but with passenger capacity up by only 1.7 per cent, the passenger load factor rose by 1.1 percentage points to 83.4 per cent; the highest for any region. The growth in May was almost double the year-to-date growth of 1.6 per cent, however, the underlying economic picture is less positive. The US manufacturing activity slowed down for the third consecutive month in May. Moreover, trade volumes looked even weaker than the global trend.
    •African airlines' traffic climbed by 9.8 per cent in May which is the second highest among the regions. In addition to responding to expanding trade volumes, African carriers are also benefitting from a sustained increase in trade by developing links with Asia and the Middle East, as well as, from the strong GDP growths in their local economies, particularly in Western Africa. Passenger capacity rose by 7.4 per cent in May, raising the passenger load factor up by 1.4 percentage points to 66.2 per cent.
    •Latin American carriers' saw a rise in demand of 7.9 per cent compared to May 2012, while passenger capacity climbed to 8.9 per cent, depressing the passenger load factor by 0.7 percentage points to 77.4 per cent. The outlook for air travel in the region appears to be solid with trade volumes experiencing a strong expansion in the second quarter.

    Domestic Passenger Markets


    Domestic demand rose by 5.6 per cent compared to May 2012 with all markets recording growth, an improvement from April's year-over-year result of 3.6 per cent. This growth was steered primarily by the markets in Asia, and particularly, China. Passenger capacity rose by 4.5 per cent and the passenger load factor was 79.9 per cent, up by 0.9 percentage points.
    •China's domestic market jumped 13.4 per cent in May, by far the strongest growth for any country, despite the recent weakening in the manufacturing and services sectors. Passenger capacity climbed to 12.0 per cent and the passenger load factor was 79.5 per cent, up by one percentage point compared to May 2012.
    •Japan's domestic market surged by 5.9 per cent in May, compared to May 2012; the second best performance. Improvements in the key economic indicators supported this strong result, which builds on the 4 per cent year-on-year growth recorded in April. May's passenger capacity also rose by 5.9 per cent and the passenger load factor was flat at 61 per cent, which is the lowest for any domestic market.
    •The US traffic climbed to 2.8 per cent in May, while passenger capacity rose by 2.5 per cent, pushing the passenger load factor up by 0.2 percentage points to 85 per cent; the highest for any market. The tepid growth rate is due to a combination of passenger capacity management and market maturity, as well as the recent drops in business confidence, which affected the demand for air travel.
    •Brazil's demand rose by 4.3 per cent in May, but weakening economic indicators, including persistently high inflation, suggests that continued growth may be vulnerable. Tight passenger capacity management by airlines'-passenger capacity declined by 4.6 per cent-pushed the passenger load factor up by 6.3 percentage points to 73.9 per cent.
    •Indian domestic traffic rose by 3.5per cent against a 0.3 per cent decline in passenger capacity, which led to a rise in the passenger load factor by 3.0 percentage points to 81.6 per cent. May's result is a rebound on April, when the market had contracted. In fact, there has been substantial volatility in growth rates over recent months. Reductions in domestic fares had resulted in stronger demand in March and possibly again in May, but this trend has not been consistent, and when coupled with a weak economic backdrop, a growth trend is difficult to establish.
    •Australian domestic demand increased by 2.3 per cent in May versus a year-ago, but a 5.0 per cent rise in passenger capacity meant that the passenger load factor slipped by 1.9 percentage points to 74.1 per cent. After a solid growth throughout 2012 (above 5 per cent), the growth trend for Australia's domestic air travel has reduced in 2013. This year's economic growth is projected to be slower than the previous year, and consumer spending is expected to decline, eroding some of the demand base for air travel.

    The Bottom Line:


    Demand for air travel continues to be strong, despite the less-than-robust economic indicators in some key markets, a further demonstration of the importance of air transport. But that importance does not carry through to the bottom line. This year, airlines' are expected to make $12.7bn in profits. With $711bn in revenues, the net profit margin will be 1.8 per cent, or around $4 profit for every passenger.
    "The average profit per passenger is only enough to buy a sandwich in most parts of the world. Aviation will have to do much better than that in order to attract the $4trillion to 5trn in capital investments, which will be needed over the next 20 years, to meet the demands for aviation-enabled connectivity," said Tyler.
    A recent IATA study supported by an analysis from McKinsey & Company shows that in the 2004-2011 period, airline investors would have earned $17bn more annually, by taking their capital and investing it in bonds and equities of similar risk. "We need to find ways to improve returns for investors. It will require fresh thinking across the aviation value chain and from the governments as well," said Tyler.
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    AMEinfo Staff

    AMEinfo staff members report business news and views from across the Middle East and North Africa region, and analyse global events impacting the region today.

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