The International Air Transport Association (IATA) reported that full year 2011 passenger demand rose 5.9% compared to 2010, in line with long-term growth trends. In contrast, cargo markets contracted by 0.7% for the year.
Growth in demand lagged behind capacity increases at 6.3% for passenger and 4.1% for cargo putting downward pressure on load factors and fares. The average passenger load factor for 2011 was 78.1%, down from 78.3% in 2010, while the freight load factor was just 45.9%, down from 48.1% in 2010.
2011 was the year of constrasting signals. Healthy passenger growth, was offset by a declining cargo market. Optimism in China and India contrasted with gloom in Europe. Towards the latter half of the year while the US grew, China and India shrank. Traffic grew but profits shrank.
International Passenger Markets
International air travel rose 6.9% during 2011, bouyed by 6.2% growth from February to July, but dipped to 1.2% from September to December. International capacity climbed 8.2%, pushing the passenger load factor down to 77.4%.
Robust business travel to long-haul markets saw European carriers shrug off the ill effects of the sovereign debt crisis and post the second highest growth rates, behind Latin American carriers. Demand rose 9.5% last year while capacity climbed 10.2%, resulting in a load factor of 78.9%.
North American carriers had the industry’s highest load factors for the year at 80.7% reflecting a tight approach capacity management which grew 6% in the face of a demand increase of just 4% for the year.
Latin American airlines led the industry in traffic growth in 2011 with a 10.2% 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%.
Middle Eastern carriers’ traffic rose 8.9% for the year, against a 9.7% climb in capacity, putting pressure on load factors, which at 75.4%, was the second lowest, behind only Africa. While airlines in the region have slowed their pace of expansion, their price competitive products and well-positioned hubs enable 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% versus a 6.4% climb in capacity driving average load factors down to 75.9%. There is no let up in the imbalance and December load factors further slid to 74.7%. A significant part of this slowdown was due to the earthquake and tsunami in Japan, which was coupled by a business slowdown in key Asian economies in the latter half of the year.
African airlines saw passenger demand rise a mere 2.3% for the year, primarily due to civil unrest in North African countries like Egypt and Libya. Capacity climbed a mere 4.4% for the 12 months and load factors were the weakest in the industry at 67.2%.
Domestic Passenger Markets
Domestic RPKs (Revenue Passenger Kilometres — a measure of actual performance) account for about 37% of the total market. In North America domestic operations constitude about 66.5% of operations. In Latin America, domestic travel accounts for 47.3%. In Asia-Pacific, the large domestic markets in India, China and Japan mean that domestic travel accounts for 42.2% of the region’s operations. It is less important for Europe and most of Africa where domestic travel represents just 11% and 11.6% of operations respectively. And it is negligible for Middle Eastern carriers for whom domestic travel represents just 5.5% of operations.
Passenger demand in domestic markets for the full year rose 4.2% against a 3.1% increase in capacity, leading to load factors of 79.3%. Individual markets varied dramatically in their performance.
US demand rose just 1.3% for the year but capacity growth too was near flat at 0.5%, reflective of the market’s maturity and a sluggish US economy. Industry leading load factors of 83%, helped boost airline revenues.
Chinese domestic demand rose a strong 10.9% in 2011 on a 7.8% capacity increase, keeping load factors at a high 82.2%, helping the profitability of the country’s airlines.
India had the strongest annual growth globally, with passenger demand up 16.4% but capacity was increased a dizzying 18.6% driven mostly by IndiGo, SpiceJet and GoAir, and load factors dived to a dismal 74.7%. Indian carriers seemed to show no sense of moderation and the imbalance during December, traditionally the one of the highest months of air travel, worsened with a 15.5% increase in capacity on a passenger traffic increase of only 9.3%. Like 2008, Indian carriers seem to be intent on devouring each other and themselves with blind capacity increases. This imbalance is once again keeping Indian carriers leading the world — in losses.
Japan’s airlines are still feeling the impact of last year’s earthquake and tsunami. Demand is down 15.2% as is capacity by 11.5%. Load factors were the lowest at a mere 58.8%.
Brazilian carriers saw a 13.7% increase in demand and grew capacity 11.2%. Load factors remain low at 69.3%.
Air Freight (Domestic and International)
Air freight markets shrank 0.6% in 2011, but, December performance increased 1.5% over November, reflective of growing business confidence with growth of the largest economy in the world — the United States. Even though dedicated freighter fleets have been reduced, airlines have added twin-aisle passenger aircraft like the Airbus A330 and the Boeing 777 which provide plenty of cargo space. This capacity expanson, has seen freight load factors decline to 45.9%.
The Bottom Line
2012 is still showing significant contrasts. The US economy is improving, but Europe, China and India are slowing down. Will the Eurozone crisis explode? Or will the political leaders be able to put a rabbit out of the hat? What impact with the new EU-ETS have on global air travel
It is far to early to predict.
What are your thoughts for 2012? Do you see a trend? Spare a moment and share your views via a comment.