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Aviation Industry Recovery Slows

by Ulrika Lomas, Tax-News.com, Brussels

05 October 2011


The International Air Transport Association has announced international air traffic results for August, showing that while passenger demand has increased, by 4.5% compared to August 2010, this is lower than the year-on-year change of 6% recorded in July, showing a slowdown in traffic.

The decline in freight markets accelerated also. The 3.8% contraction in freight markets recorded in August was more than double the pace of July’s 1.8% decline.

“The industry has shifted gears downward. The pace of growth in passenger markets has dipped and the freight business is now shrinking at a faster pace. With business and consumer confidence continuing to slump globally there is not a lot of optimism for improved conditions any time soon,” commented Tony Tyler, IATA’s Director General and CEO.

Passenger load factors were high at 81.4%, almost as high as in July. While this is close to historically high levels reflecting the industry’s ability to efficiently allocate capacity, it too showed weakness—falling by 1.3% compared to July.

International passenger demand was up 6.2% in August compared to the previous year. However, when compared to July, demand contracted by 1.8%.

On a regional basis:

  • European airlines achieved the strongest growth in international passenger traffic in August with a 7.9% increase, just slightly below a capacity expansion of 8.2%. Load factors of 83.9% were at historically high levels. While the August growth was the strongest in the industry, it should be noted that this is below the 10.6% demand expansion reported for the first eight months of the year indicating that markets are softening;
  • Middle Eastern carriers recorded the second highest demand growth at 6.7%, behind capacity expansion of 7.6%, leaving load factors down at 76.2%;
  • North American carriers reported the weakest performance with growth of just 2.9%, which was partly a result of equally slow growth in capacity. This is a sharp downturn from stronger growth earlier in the year, as reflected in the 5.6% year-to-date demand expansion. The region’s carriers posted the highest load factor at 86.1%;
  • Asia-Pacific carriers reported 5.3% demand growth for August, slightly below a 5.6% capacity expansion. This is slightly better than the year-to-date growth of 4.4%, reflecting the recovery in Japanese international travel. Load factors of 78.9% were below the industry average of 81.2%;
  • Latin American carriers reported 5.6% growth for August, behind their 7.1% capacity expansion. This is well below the 10.9% demand growth recorded over the first eight months of the year. Load factors stood at 76.9%; and,
  • African carriers reported 5.2% demand growth against a capacity expansion of 6.3%. The continent’s carriers had the lowest load factor at 70.0%.

August traffic results are in line with expectations for a decline in profitability heading into 2012.

Airlines are expected to see total industry profits fall from USD6.9bn in 2011 to USD4.9bn.

“Airlines are bracing for tough times ahead. Economic uncertainty owing to the European sovereign debt crisis and the growing likelihood of a protracted period of slow growth in developed economies mean the industry will be even more focused on reducing costs and improving efficiency. To ensure that airlines can continue to catalyze economic activity, we need governments to review the often onerous tax burden that they place on aviation,” Tyler continued.

TAGS: aviation

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