The International Air Transport Association (IATA) reported on Wednesday that full year 2011 passenger demand rose 5.9 percent compared to 2010, in line with long-term growth trends. In contrast, cargo markets contracted by 0.7 percent for the year; but recorded positive demand growth in December of 0.2 percent. Growth in demand lagged capacity increases at 6.3 percent (passenger) and 4.1 percent (cargo) putting downward pressure on load factors. The average passenger load factor for 2011 was 78.1 percent, down from 78.3 percent in 2010, while the freight load factor was just 45.9 percent, down from 48.1 percent in 2010.
"Given the weak conditions in Western economies the passenger market held up well in 2011. But overall 2011 was a year of contrasts. Healthy passenger growth, primarily in the first half of the year, was offset by a declining cargo market. Optimism in China contrasted with gloom in Europe. Ironically, the weak euro supported business travel demand. But Europe's primarily tax and restricted approach to aviation policy left the continent's carriers with the weakest profitability among the industry's major regions. Cautious improving business confidence is good news. But 2012 is still going to be a tough year," said Tony Tyler, IATA director general and CEO.
Passenger demand for December rose 5.4 percent compared to the same month in 2010. But the trend since mid-year has clearly slowed, as travel markets react with a lag to the decline in confidence that weakened cargo in the second half of 2011. Comparisons with December 2010 are also distorted as severe winter weather in Europe and North America as well as strikes in Europe suppressed demand. December 2011 passenger demand was up just 0.7 percent over November while the load factor declined 0.2 percentage points. Freight capacity climbed 4.4 percent in December compared to December 2010. The freight load factor was just 46.1 percent for the month.
International air travel rose 6.9 percent last year, reflecting the strong growth of 6.2 percent recorded between February and July, compared to 1.2 percent between September and December. International capacity climbed 8.2 percent, pushing the passenger load factor down to 77.4 percent. For December, international traffic climbed 6.4 percent year over year, in part owing to depressed traffic levels in 2010 in North American and Europe, and rose 1.4 percent compared to November.
European carriers posted the second highest growth rates, behind Latin American carriers. Demand rose 9.5 percent last year while capacity climbed 10.2 percent, resulting in a load factor of 78.9 percent. December traffic rose 9.8 percent but this was surpassed by a 10.3 percent rise in capacity. Europe's strong performance is somewhat surprising in light of the European sovereign debt crisis; however European airlines have benefited from robust business travel on long-haul markets, in part related to strong exports from Northern Europe.
North American carriers had the industry's highest load factors for both the year at 80.7 percent, and the month of December at 80.5 percent. These figures demonstrate tight capacity management, as the industry coped with demand increases of just 1 percent for December and 4 percent for the year. Nevertheless, capacity still expanded a little faster than demand, with increases of 1.4 percent in December and 6 percent for the year, so load factors were not quite as high as in 2010.
Latin American airlines led the industry in traffic growth in 2011 with a 10.2 percent rise in demand compared to 2010. This also was the only region in which demand growth outstripped capacity growth for the full year, with capacity up 9.2 percent. However, December's strong traffic growth of 8.8 percent was exceeded by an 11.1 percent rise in capacity. Latin America air traffic is supported by healthy domestic economic conditions and trade activity with North America and Asia.
Middle Eastern carriers' traffic rose 8.9 percent for the year, against a 9.7 percent climb in capacity, putting pressure on load factors, which at 75.4 percent, was the lowest except for Africa. However, December ended on a more positive note, with traffic up 11.7 percent against an 11 percent rise in capacity and a load factor of 77.1 percent. Airlines in this region have slowed the pace at which they have expanded but price competitive products and geographically well-positioned hubs are enabling Middle East carriers to continue to improve their share of long-haul markets.
Asia-Pacific airlines experienced the widest traffic/capacity gap for the year, with annual traffic up 4.1 percent versus a 6.4 percent climb in capacity. A significant part of this slowdown was due to the earthquake and tsunami in Japan, the impact of which on air travel should be temporary. However, the sharp fall in air freight in the region as Western demand for manufactured goods declined also reduced some business travel for the region's airlines. The average load factor was 75.9 percent. In December, demand climbed 3.7 percent and capacity rose 5.9 percent producing a 74.7 percent load factor.
African airlines saw travel demand fall 0.7 percent for December, but it rose 2.3 percent for the full year. This relatively weak performance was in part owing to the civil unrest in a number of North African countries. However, good economic performance in the region was also generating significant demand for air travel. African airlines were unable to fully benefit and their low growth represents a loss of market share. Capacity climbed just 0.2 percent for December and 4.4 percent for the 12 months. Load factors were the weakest in the industry at 68.9 percent for December and 67.2 percent for the full year.
Passenger demand in domestic markets for the full year rose 4.2 per cent compared to a 3.1 percent rise in capacity, leading to a load factor of 79.3 percent. December demand rose 3.7 percent from a year earlier; however, this represented a 0.5 percent decline from November. It is not clear yet whether this signals a new trend or is just an anomaly. Individual markets varied dramatically in their performance.
Air freight markets turned up at the end of the year after shrinking through much of the summer and autumn as business confidence across major economies, and export orders, slumped. "Improving business confidence and encouraging news from the US economy are heartening developments. But it is far too early to start predicting a soft landing for 2012. The euro zone crisis is far from over. Failure to achieve a durable solution will have dire consequences for economies around the world. And it would most certainly tip the airline industry into the red," said Tyler.
"Airlines have made massive investments in new fuel-efficient, environmentally friendly aircraft. The challenge is to deploy them profitably into a dynamic and uncertain market. Governments, meanwhile, need to take a strategic view of the airline industry that recognises its value as a catalyst for economic growth. Airlines transport about 3 billion people a year. And over a third of the value of goods that are traded internationally are transported by air.
Getting people and goods to their destinations more efficiently improves competitiveness. Infrastructure investments to enable aircraft to land and takeoff with a minimum of delay and fly the most fuel and carbon efficient trajectories will return a far greater payout to global GDP than shortsighted and narrowly-focused tax grabs. Let's hope that 2012 will be the year when politicians put the required political capital behind important projects such as the Single European Sky and NextGen in the US," said Tyler.
