IATA Reports Upturn in Premium Travel Passengers

IATA reports that in latest Premium Traffic Monitor there are now early signs of an upturn in the number of passengers traveling in premium seats. By July, numbers were still well below the levels seen a year ago with a 14.1 percent decline reported.

However, compared to the 21.3 percent decline in June, this means that premium passenger numbers rose between June and July. Premium travel on international markets, which is mostly for business, is closely correlated to world trade, which bottomed out in May and started to turn up in June.

This improvement in cross-border trade is boosting business travel but demand is still very weak compared to the recent past and there remains much excess capacity, producing intense competition. Moreover, there are no signs as yet that corporate travel buyers are willing to pay for the more flexible, full service and, for the airlines, higher yielding premium seats.

As a result, IATA estimates average premium fares remained 23 percent down from last year. Business travel may be starting to return but, as a result of low yields, IATA estimates revenues from premium travel are improving much more slowly than passenger numbers and was still down 35 to 40 percent on the year in July.

Consumer confidence has been rising in most of the major economies since the end of the first quarter and the number of passengers traveling on economy tickets bottomed out at the same time.

Economy travel was also influenced by business travelers switching to cheaper seats. As a result passenger numbers in this segment were down just 1.2 percent in July on levels seen last year, a marked improvement on the 5.5 percent fall reported in June.

Overall passenger numbers were down 2.4 percent in July, similar to the 2.9 percent fall in passenger kilometers flown reported recently. Looking ahead, further improvement looks likely but forecasts for growth in world trade are weak (less than 3 percent in 2010), and consumer confidence remains far below 2007 levels. So a continued upturn in both premium and economy travel is likely to be weaker than previous upturns.