IATA Reports January Air Traffic Growth, Concern Over Rising Oil Prices

IATA Reports January Air Traffic Growth, Concern Over Rising Oil Prices

The International Air Transport Association (IATA) said that international scheduled traffic results for January showed an 8.2 percent increase in passenger traffic in January and air freight grew 9.1 percent over January 2010. “We begin the year with some good news. January traffic volumes are up—8.2 percent on January 2010 and 2.6 percent on December,” said Giovanni Bisignani, IATA’s director general and CEO. “With most major indices pointing to strengthening world trade and economic growth, this is positive for the industry’s prospects. But we are all watching closely as events unfold in the Middle East. The region’s instability has sent oil prices skyrocketing.”

Bisignani said IATA’s current forecast is based on an average annual oil price of $84 per barrel (Brent). Today the price is over $100. For each dollar it increases, the industry is challenged to recover $1.6 billion in additional costs. With $598 billion in revenues, $9.1 billion in profits and a profit margin of just 1.5 percent, even with good news on traffic 2011 is starting out as a very challenging year for airlines, he said.

By January 2011, according to IATA, air travel volumes were 18 percent higher compared to the low point reached in early 2009 and some 6 percent above the pre-recession peak of early 2008. Air freight in January was 39 percent above the low point reached at the end of 2009 and some 6 percent above the pre-recession peak of early 2008. But freight has fallen 2 percent since its May 2010 peak at the height of the re-stocking bubble.

IATA said the 8.2 percent growth in passenger traffic shows a recovery from December’s slowdown (with 5.4 percent growth) that was related to severe weather in Europe and North America, which reduced total traffic by 1-2 percent. Passenger load factors are high, but there is evidence that supply growth is beginning to run ahead of demand. Compared to the previous January, the 8.2 percent demand increase was outstripped by a 9.1 percent increase in capacity, resulting in an average load factor of 75.7 percent. Adjusting for seasonality this is equates to a 77.7 percent load factor. This is a 1.1 percentage point drop from the October 2010 peak.

According to IATA, Europe’s carriers recorded a 7.9 percent year-on-year growth in passenger traffic and an 8.8 percent increase in capacity. Strong January performance reflects a rebound from December which was depressed by cancellations due to severe weather. Nonetheless, with capacity growth outstripping demand, the load factor slipped by 0.6 percentage points to 73.9 percent.

North American carriers recorded an 8.7 percent year-on-year growth in demand and a 10.0 percent increase in capacity in January. This imbalance saw load factors slip by nearly a full percentage point to 77.2 percent. International passenger traffic carried by North American airlines has now recovered to 2 percent above its pre-recession peak of early 2008.

Asia-Pacific carriers recorded a 5.8 percent year-on-year demand increase in January, more than double the 2.8 percent increase recorded in December. Increasingly strong economic growth is driving the acceleration in travel market growth. Capacity increased by 7.0 percent, pushing the load factor down 0.9 percentage points to 77.7 percent.

Latin American carriers recorded an 11 percent growth in demand and a 12.4 percent growth in capacity. The region’s load factor fell by 1 percentage point to 79.7 percent but it is still the highest in the world. Traffic volumes in January were some 16 percent higher than the pre-recession peak in early 2008. Latin American traffic comparisons have now been adjusted to eliminate the impact of the Mexicana bankruptcy and more accurately reflect the growth taking place with carriers actually operating in the region.

Middle East carriers saw demand grow 11.7 percent in January compared to January 2010. The post recession recovery has been the strongest – some 45 percent higher compared to the low point in September 2008. The region’s economy looks positive with a predicted 4.2 percent GDP growth which is likely to sustain growth in the air traffic market. Political instability in parts of the region is expected to dampen demand in the affected areas. Egypt, Libya and Tunisia combined comprise around a fifth of the region’s international passenger traffic.

African carriers grew by 14.3 percent year-on-year and passenger traffic levels are now around 28 percent higher compared to the previous peak reached in early 2008. However, this market has a relatively small impact as it represents about 3 percent of the total traffic. African load factor grew slightly to 68.7 percent, the lowest of any region.