Airlines in the Middle East region continue to benefit from the strength of regional economies as well as expansion in export orders that support international business activity and business-related premium travel.
Middle East carriers have again seen the strongest increase in international air travel, with a rise of 15.8% in September compared to a year ago, according to IATA.
Airlines in the region continue to benefit from the strength of regional economies as well as expansion in export orders that support international business activity and business-related premium travel. Capacity rose 14.9% and load factor climbed 0.6 percentage points to 78%, IATA said.
Globally, IATA said passenger traffic segment showed a demand growth of 5.3% (measured in revenue passenger kilometres or RPKs) in September compared with the same period in 2013.
This builds on the positive growth trend for passenger demand even though the performance was slightly below the August year-over-year rise of 6.3%. September capacity rose 5.1% and load factor rose 0.2 percentage points to 80.3%.
“Overall, demand for passenger travel is growing in line with expectations. We saw, however, some shifting of the sources of that growth in September, largely driven by economic factors. The strengthening of the US and Asian economies was offset by weakness in Europe and Latin America,” said Tony Tyler, IATA’s director general and CEO.
“The three big stories in September were Europe, Russia and India,” said Tyler.
European airlines reported 3.9% growth for international demand. That is a significant drop from the 7.0% reported in August indicating the impact of the Air France crew strike and a general weakening of European economic prospects.
Year-on-year growth for Russian domestic demand fell to 5.6% in September from 10.1% in August. The impact of price stimulus wore-off and the weakness revealed could be a first indicator of the economic impact of the Russia-Ukraine crisis.
Indian domestic travel spiked with a 26.3% growth in September (several times the 7.6% growth recorded in August) as a result of price stimulation, IATA said.
“It’s an interesting time for the global air transport industry, highlighting the complex vulnerabilities of the business. The fall in the price of oil is a good example. It is good news for an industry that spends a third of its operating budget on fuel. The full impact of the price drop will only be realised over time because of a time lag built into jet fuel pricing. And it could even be an indicator of difficulties ahead if the fall is driven by declining demand for oil rather than rising supply capacity,” said Tyler.
“There are a lot of risks out there; growing weakness in key economies such as Europe and Brazil, the potential threat of Ebola to public confidence in flying, and the impact of political instability in various parts of the world. The positive economic developments in Asia and the US continue to underpin profitability. But it is a delicate balancing act,” Tyler added.
IATA anticipates airlines to deliver an $18.0bn net profit on revenues of $746bn for a 2.4% net profit margin in 2014. IATA will update this estimate and take a first look at 2015 profitability on 10 December at its Global Media Day in Geneva.
Mideast carriers top global freight growth with 17% gain
Cargo volumes carried by the Middle Eastern carriers grew year-on-year (y-o-y) by a robust 17% against the global average of 5.2% in September, according to International Air Transport Association (IATA) figures.
“Airlines in the (Middle East) region are capturing opportunities for growth by introducing services to regions of strong and developing trade activity, including Africa and Central America,” IATA said.
The Middle East airlines are also increasing service offerings for important commodities like perishables, and linking markets in Asia Pacific with produces in Africa, it added.
With capacity (available freight tonne kilometre or AFTK) growing 14.5%, the Middle Eastern carriers’ freight load factor (FLF) was 44.8%.
African airlines recorded the second strongest rise in FTKs in September, up 11.5% year-on-year. Regional trade volumes are yet to show consistent improvement, but key economies like South Africa have shown signs of better performance. South Africa managed to avoid entering a recession after seeing 0.6% growth in gross domestic product in the second quarter.
Highlighting that growth in FTKs carried by Asia Pacific continues to show steady improvements, IATA said there was a 5.7% rise in volumes in September compared to a year ago.
Emerging Asia trade volumes continue to rise after a sharp decline in the first quarter, and the release of the latest Apple iPhone also provided a boost to air freight demand from the manufacturing centre in China to various parts of the world.
Moreover, the Chinese economy has slowed compared with the double-digit rates of expansion during previous years, but government stimulus earlier this year helped manage the transition onto a slower growth path.
The recent results of purchasing manager surveys (Markit) indicate gains in business activity in the manufacturing sector and a notable rise in export orders.
North American airlines recorded a strong gain in FTKs in September, up 5.4% compared to a year ago, supported by increasing trade and business activity after a weather-related slowdown in early 2014.
Latest data show a rebound in trade volumes and underlying growth trends in business activity are positive, which should provide some support for stronger growth in trade and air freight demand ahead.
However, European airlines are showing the impact of the Russia-Ukraine crisis as well as crew strikes by Air France with FTKs down 1.6% in September compared to a year ago. The Russia-Ukraine crisis and ensuing EU sanctions have resulted in downward pressure on growth momentum in the region, including key economies like Germany.
In addition, a 14-day strike by Air France-KLM pilots reduced air freight capacity which led to an estimated 4% point reduction in the September year-on-year growth result for European airlines.
Carriers in Latin America also experienced weakness, with only a 0.3% rise in volumes in September – this is inconsistent with latest trade data which show rising volumes, particularly exports. “If the trend continues, stronger trade growth could lead to improvements in demand for air freight,” IATA said.
