Geneva – The International Air Transport Association (IATA) announced 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% compared to February 2012.
The 3.7% growth masks improvements in recent months. 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%. This is almost double the growth trend over the first 9 months of 2012.
“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 Tony Tyler, IATA Director General and CEO.
Capacity was up 1.0% on the previous February and the industry load factor stood at 77.1%. “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.”
Feb 2013 vs. Feb 2012 RPK Growth ASK Growth PLF
International 3.6% 1.1% 76.3
Domestic 3.9% 0.8% 78.8
Total Market 3.7% 1.0% 77.3
YTD 2013 vs. YTD 2012 RPK Growth ASK Growth PLF
International 3.6% 1.9% 76.9
Domestic 2.4% 1.2% 77.6
Total Market 3.1% 1.7% 77.1
International Passenger Markets
February international passenger demand was up 3.6% compared to the year-ago period, and 0.9% compared to January. Capacity rose 1.1% versus February 2012 and load factor climbed 1.8 percentage points to 76.3%.
Asia-Pacific carriers recorded an increase of 4.5% compared to February 2012. Continuing improvements in China’s economy and growth in intra-Asian trade provided strong support to the passenger business of the region’s airlines. With this robust performance, demand associated with Asia-Pacific’s emerging markets has been a major driver of the stronger growth in international traffic seen recently.
European carriers recorded 0.8% growth compared to February 2012. Reflecting the contraction of the Eurozone economy in the fourth quarter of 2012, European carriers have not seen any growth in international demand since October. They have responded by tightly managing capacity, which declined 2.0% year-on-year in February. This pushed the load factor up to 76.5%.
North American airlines’ international traffic rose just 0.3% 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% in February compared to October. The load factor rose to 76%, reflecting a 4.6% reduction in capacity year-on-year.
Middle East carriers saw year-on-year demand expand by 10.6%--the strongest among all the regions. Capacity expansion was held to 9.7% with the result that load factor rose 0.7% points to 77.7%, the highest for any region.
Latin American airlines posted year-on-year growth of 7.0%. A 9.9% rise in capacity, however, pushed load factor down 2.1 percentage points to 76.7%. Robust economic growth in countries such as Colombia, which is experiencing strong demand for commodities exports, is contributing to rising air travel.
African airlines’ traffic climbed 7.7% compared to February 2012, second best among the regions, while capacity rose 3.9%, boosting the load factor 2.3 percentage points to 65.2%. The rise in load factor commenced in mid-2012, supported by an increase in demand and also from tighter capacity management.
Domestic Passenger Markets
Domestic markets climbed 3.9% in February compared to a year-ago, driven primarily by surging demand in China, as all other markets experienced declines with the exception of Australia, which rose 2.2%. Total domestic capacity was up 0.8% compared to February 2012 and load factor rose 2.3% points to 78.8%.
US traffic dipped 0.6% in February while capacity dropped 2.5%, pushing load factor up to 80.4%, 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% since the fourth quarter of 2012.
China’s domestic traffic soared 20.2% compared to a year ago, reflecting the impact of Chinese New Year-related travel, but also the continuing acceleration of the economy. With capacity up 13.7%, load factor jumped 4.5 percentage points to 83.8%, which was the highest for any domestic market. Compared to January, traffic was up 5.3%.
Japan’s domestic market contracted 3.1% compared to February 2012 owing to the flat-lining economy and related weak domestic demand for air travel. Japan’s domestic traffic is 12% below pre-Tsunami levels. Capacity fell 4.7% year-on-year and load factor was the lowest for any market at 62.4%.
Brazil saw traffic fall 4.3% on a 10.6% plunge in capacity as the country’s airlines act to offset downward pressure on profitability, with economic growth continuing to fall below expectations. Load factor rose 4.6% points to 70.7%.
Indian domestic traffic dropped 9.1% in February compared to a year ago. In addition to the slowing economy, Indian airlines have been reducing capacity from previously unsustainable levels. Capacity declined 7.5% in February and load factor slipped to 74.5%.
The Bottom Line:
On 20 March, IATA raised its outlook for the industry’s earnings performance to a net profit margin of 1.6% from 1.3%. “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 US—could negatively impact the outlook,” said Tyler.
Budget sequestration measures began to take effect on Monday, 1 April. 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.
“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. 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.
View full February passenger results (pdf)
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Notes for Editors:
IATA (International Air Transport Association) represents some 240 airlines comprising 84% of global air traffic.
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Domestic RPKs account for about 37% of the total market. It is most important for North American airlines as it is about 67% of their operations. In Latin America, domestic travel accounts for 47% of operations, primarily owing to the large Brazilian market. For Asia-Pacific carriers, the large markets in India, China and Japan mean that domestic travel accounts for 42% of the region’s operations. It is less important for Europe and most of Africa where domestic travel represents just 11% and 12% of operations respectively. And it is negligible for Middle Eastern carriers for whom domestic travel represents just 6% of operations.
Explanation of measurement terms:
RPK: Revenue Passenger Kilometers measures actual passenger traffic
ASK: Available Seat Kilometers measures available passenger capacity
PLF: Passenger Load Factor is % of ASKs used.
IATA statistics cover international and domestic scheduled air traffic for IATA member and non-member airlines.
All figures are provisional and represent total reporting at time of publication plus estimates for missing data. Historic figures may be revised.
Total passenger traffic market shares by region of carriers in terms of RPK are: Asia-Pacific 32.6%, North America 25.3%, Europe 24.6%, Middle East 8.9%, Latin America 6.2%, Africa 2.5%.
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Air Passenger Market Analysis - February 2013
Key points from our full report on
air passenger markets in February:
The growth trend in global air travel continues to increase strongly;
RPKs expanded 1.2% in February month-on-month, equating to a double-digit annualized growth rate;
Between October and February, global RPKs expanded at an annualized rate of 9%;
This is almost double the 5% growth seen throughout 2012;
Year-on-year growth was up 3.7% in February, not reflecting this strong demand;
But recent year-on-year comparisons are skewed by weaker demand prior to the Q4 2012 upturn;
Air travel markets are responding to the overall improvement in the business environment;
Business confidence signaled economic growth for the last 3 months, industrial production has picked up;
On international markets, Asia-Pacific airlines continue to drive growth in air travel;
By contrast, European airlines have not seen any growth in international RPKs since October 2012;
China's domestic market expanded 5.3% in February month-on-month, evidence of acceleration in their economy;
Load factors continue to reach records, above 80% seasonally adjusted for the total market;
The outlook for air travel remains positive with business confidence pointing to further growth;
But much depends on Eurozone stability - the major downside risk to the current growth trend.
- IATA Economics -
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