Despite Strong Traffic Growth, IATA’s Tyler Warns of Market Fragility

 - May 7, 2012, 10:35 AM
European airlines have seen robust traffic gains, despite double-dip recessions in Spain and the UK.

Once again monthly International Air Transport Association (IATA) airline traffic statistics reflected “positive distortion” caused by geopolitical and other factors, resulting in somewhat inflated data for March. Last week IATA reported a rise in total passenger demand of 7.6 percent for the month of March over the same period a year earlier, while freight demand climbed 0.3 percent. If not for the disruption caused by the emergence of last year’s Arab Spring and the Japanese earthquake and tsunami in March 2011, the year-over-year rise in passenger traffic would have settled at closer to a still relatively strong 5 or 6 percent, said IATA.

Meanwhile, the timing of the Chinese New Year this January led to stronger February shipments this year, while last year the Chinese New Year fell in February, resulting in stronger March 2011 figures and less favorable year-over-year comparisons. In fact, compared with February 2012, March air cargo demand rose by 2.2 percent. 

“Given the prevailing economic conditions with some European states returning to recession, passenger demand is holding up well,” said IATA director general and CEO Tony Tyler. “But this is bringing little relief to the bottom line because yields are not keeping pace with the continued high price of oil.”

Fortunately for the airlines, international travel continued to show exceptionally strong growth, rising 9.6 percent in March compared with the same period a year earlier, while capacity climbed just 5 percent, resulting in a load factor of 77.7 percent, up 3.2 percentage points from March 2011.

While Middle Eastern airlines rebounded nicely from the effects of last year’s Arab Spring, registering 20.9-percent growth in demand, Europe’s increase of 8.8 percent perhaps ranked as the most impressive showing among all regions, given deepening recessions in parts of the continent. IATA attributed the growth partly to expanding European exports to stronger Asian economies and the associated business travel.

However, Tyler questioned how long the continent can continue to register such gains in an environment where the UK, while again in the grip of a recession, has raised its passenger duty by 8 percent, and Spain—another country that has slipped into a so-called double-dip recession in recent weeks—contemplates a 50-percent increase in charges at its main airports in Madrid and Barcelona.

“The goose that lays the golden eggs can take only so many knocks before she fails to produce,” warned Tyler.