Demand Growth Compromised by High Oil Prices, IATA Warns

The International Air Transport Association (IATA) announced global traffic results for March showing that total passenger demand rose 7.6 percent and freight demand climbed 0.3 percent compared to the same month last year.

Comparisons with March last year are affected by events that depressed passenger demand in 2011, including the Arab Spring, which disrupted travel in the Middle East and North Africa beginning in February 2011 and the earthquake and tsunami in Japan in March 2011 that impacted air travel across the Asia-Pacific region.

IATA estimates that the year-on-year rise in air travel in March was about two percentage points higher than it would otherwise have been in the absence of these events.

Cargo demand, meanwhile, was affected by the timing of the Chinese New Year, which occurred in January this year -leading to stronger February shipments—but took place in February 2011- leading to stronger March 2011 shipments and weaker year-to-year comparisons. Compared to February 2012, March air cargo demand was significantly stronger by 2.2 percent.

Total passenger capacity rose 4.4 percent compared to March 2011, resulting in a load factor of 78.3 percent, up 2.4 percentage points over the year-ago period. Freight capacity, however, climbed 1.7 percent year-on-year, above the rate of demand, placing pressure on load factors.

International air travel rose 9.6 percent in March compared to the year-ago period, while capacity climbed 5 percent, resulting in a load factor of 77.7 percent, up 3.2 percentage points from March 2011.

European airlines recorded the strongest traffic growth among the major regions despite deepening recessions in parts of the continent, with demand up 8.8 percent year-on-year, on a 4.1 percent increase in capacity. Load factor rose to 78.5 percent. This growth is partly the result of expanding European exports to stronger Asian economies and the associated business travel.

North American airlines had a 5.3 percent rise in passenger traffic, a solid performance for the region and concurrent with better economic results from the US, particularly with increasing consumer confidence. Capacity rose at a much slower rate than demand, by 0.9 percent, pushing load factors up fractionally to 80.3 percent, the highest of all the regions. Very tight capacity control in this region is allowing airlines to boost asset utilization, helping to offset part of the rise in fuel costs.

Latin American carriers experienced the second-slowest demand growth among the regions, but traffic still rose 7.7 percent year-over-year on a 6.7 percent rise in capacity. Passenger load factor was 77.9 percent. It is among the regions least impacted by the distortions in 2011 and this latest expansion reflects a continuation of the steady growth seen since early 2009.

Airline traffic in Brazil was affected by the timing of Carnival, which occurred in February 2012, a month earlier than in 2011. March 2012 traffic growth of 2.9 percent is estimated to be about half what it would have been absent the distortion. Capacity rose 9.2 percent, pushing the load factor down to 65.2 percent.
 
Both Spain and the UK have slipped into a double dip recession in recent weeks. From April this year, the UK hiked its Air Passenger Duty (already the most expensive aviation tax in the world) by 8 percent which is double the inflation rate. Spain, with an economy highly dependent on tourism, is contemplating a 50 percent increase in charges at its two main airports (Barcelona and Madrid).