Asian load factors fall, despite rising demand

Asian load factors fall, despite rising demand

The pace of growth in the global passenger aviation industry picked up last month, but Asian airlines continue to suffer from declining load factors. According to the latest data from IATA, global passenger traffic increased 5.6% year-on-year in September 2011 – stronger than the 4.6% growth recorded in August.

For Asia Pacific’s carriers however, passenger demand only increased 4.3% in September. Coupled with a 6.3% increase in capacity, the region’s average cabin load factors slipped to 76.0%. The global average load factor in September was 79.5%.

“September’s strength in passenger demand was a pleasant surprise. Freight demand contracted for a fifth consecutive month and this trend is in line with falling business and consumer confidence. We are still expecting a general weakening in passenger traffic as we head towards the year-end,” said Tony Tyler, IATA’s Director General & CEO.

IATA said that the rising demand may reflect the robust conditions in emerging markets and travel booked earlier in the year when there was more economic optimism.

Latin America carriers reported the largest increase in international demand (+10.6%) in September, while European carriers saw a 9.2% increase, slightly behind the 9.5% increase in capacity. Traffic on by Middle East carriers rose 9.1%, ahead of a capacity increase of 8.5% – a step change from the 15% capacity growth seen in recent years. North American carriers recorded a 1.2% increase in demand, the weakest among the regions. African carriers experienced a 5.0% increase in demand, closely matching the 5.2% increase in capacity.

Domestic markets rose strongly in September at 3.8% (up from 2.2% in August). This was also significantly stronger than the 2.8% increase in domestic capacity. India led the way with 18.4% growth, although slightly below the 20.1% increase in capacity. This was followed by China at 9.7% (more robust than the 8.1% increase in capacity) and Brazil, where a 7.5% increase in demand was well below the 14.6% increase in capacity.

The recovery in Japan’s domestic market following March’s earthquake and tsunami stalled in September with traffic 14.5% below previous year levels. This is a step back from the 12.3% decline recorded in August. Carriers in the US domestic market cut capacity by 0.7% but recorded an increase in demand of 1.6%.

IATA warned however, of tough times ahead. Despite the stronger-than-expected growth in September, IATA is expecting airline profitability to decline from US$6.9 billion in 2011 to US$4.9 billion in 2012 for a margin of just 0.8%.

“Airlines play a key role in connecting global business. At this time of economic uncertainty in many parts of the world, US plans to raise an additional US$36 billion in aviation taxes over the next decade could not be more misguided. Last month the UK recognised the harm that its GBP2.5 billion (US$4.0 million) Air Passenger Duty was doing in Northern Ireland and announced a major cut. It’s time to apply that lesson at a more global level. Increasing the cost of doing business by making air transport more expensive destroys competitiveness. Governments should protect the 33 million jobs and US$3.5 trillion in economic activity supported by aviation with a sound policy framework

Mark Elliott
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Mark Elliott
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