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Resurgence For Commercial Aviation

by Ulrika Lomas, Tax-News.com, Brussels

27 August 2015


International air passenger demand was up 5.3 percent in June, or by 5.7 percent in revenue passenger kilometers, compared with a year earlier, according to the International Air Transport Association.

Airlines in all regions except Africa recorded growth, although there was wide variation between regions. Capacity climbed six percent, pushing down load factor 0.5 percentage points to 80.4 percent.

Asia-Pacific airlines reported substantial growth of 6.8 percent, while capacity climbed 5.8 percent and load factor increased 0.7 percentage points to 78.1 percent. Latest data shows that trade activity to/from Emerging Asia is down eight percent compared with the end of 2014, while China's manufacturing sector has been struggling in recent months, accompanied by weakness in export orders, according to the financial data firm Markit.

European carriers saw demand climb 4.1 percent in June versus June 2014, which was below the 5.7 percent rise in traffic in May. IATA said that, although business activity indicators suggest that the region's economic recovery is on track, consumer sentiment has been hampered by events in Greece including the potential consequences of the country exiting the Eurozone. Capacity rose 3.5 percent and load factor climbed 0.4 percentage points to 84 percent.

North American airlines experienced a 2.7 percent increase in traffic, which was above the two percent increase recorded in May. Capacity rose 2.8 percent and load factor slipped 0.1 percentage points to 84.9 percent, which still was the highest among the regions. While it is expected that the US had better economic performance in the second quarter than the first quarter, the strengthening dollar is likely to continue to put pressure on international leisure travel to the US.

Middle East carriers' June demand climbed 10.5 percent but this was eclipsed by a 19.5 percent jump in capacity that caused load factor to plunge 5.7 percentage points to 74.3 percent. Although June traffic growth was slower than in May (14 percent), this was partly owing to the timing of Ramadan, which started in June this year but occurred mostly in July in 2014. The holy month tends to subdue demand for air travel.

Latin American airlines had a 5.9 percent rise in traffic compared with June 2014. Capacity rose 5.8 percent, causing load factor to edge up 0.1 percentage points to 79.6 percent. Regional trade volumes showed strong improvement during the first half of 2015, providing a boost to business-related international travel despite weakness in Brazil and Argentina.

African airlines' traffic fell two percent in June year-to-year, due to negative economic developments in parts of the continent including Nigeria, which relies heavily on oil revenues. Capacity slipped 1.7 percent and load factor dipped 0.2 percentage points to 67.1 percent.

Domestic travel demand rose 6.5 percent in June compared with June 2014, with the strongest growth occurring in India, China, and Russia. Total domestic capacity was up six percent, and load factor was 82.2 percent, up 0.4 percentage points.

Australia's airlines saw domestic traffic decline by 2.1 percent in June as signs of an improving economy have not spurred a turnaround in air travel. Russian air travel experienced a spike in June (+9.5 percent) as a combination of added capacity and a weak ruble helped boost domestic air travel, despite the country's economic woes. The increase was nonetheless outstripped by the 16.6 percent increase in domestic capacity.

IATA Director General Tony Tyler sad: "Midway through the peak summer travel season in the Northern Hemisphere, demand for connectivity remains high. Tourism is the life blood of many economies and much of it arrives by air. Unfortunately, too often governments appear not to realize this, burdening airlines and travelers with high fees and taxes. The short-term financial benefit comes at the long-term expense of the economy. The French Government's decision to allow annual charges increases at Paris's two airports between 2016 and 2020 is the latest example – incredible for a country where tourism and global business play such big economic roles. Dialogue between industry and government is critical to finding win-win solutions."

"That is what we are hoping for in India with the imminent announcement of its new aviation policy. Improved air connectivity would make a major contribution to the Government's efforts to make it easier to do business in India. For that, we need a policy framework that reduces onerous taxes and regulation and that continues to improve infrastructure and cost efficiency. Aviation has much to contribute to any country's economy. But it will not happen by accident. The peak travel season should serve as a reminder to all governments of the importance of aviation policies focused on enabling aviation to catalyze economic growth," said Tyler.

TAGS: Russia | tax | business | India | Niger | Nigeria | aviation | Australia | China | fees | manufacturing | Brazil | Greece | regulation | trade | Argentina | Europe | Asia-Pacific | North America | Africa | Middle East

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