Air transport in ‘demand limbo’ says IATA

By Kevin Rozario |

June traffic data from the International Air Transport Association (IATA) show a continued slowing of growth in air transport demand in line with weakness in business and consumer confidence.


The airline organisation says that while year-on-year demand in June expanded by +6.2%, capacity grew by a much more cautious +4.5%. Although this appears to be a healthy growth rate, the trend since early 2012 has seen a slowdown. This is illustrated by isolating the February through June trend which shows +2% annualised growth – a major slowdown from the +8% annualised growth rate experienced from mid-2011 through to January 2012.


Tony Tyler (left), IATA’s Director General and CEO, says: “The uncertainty that we see in the global economic situation is being reflected in air transport’s performance. Although there are some pockets of solid performance, it is difficult to detect a strong trend—positive or negative—at the global level.


“Passenger markets have been growing more slowly since the beginning of the year and freight market gains have been mostly very weak. The net effect is a demand limbo as consumers and businesses hedge their spending while awaiting clarity on the European economic front.”



In international markets, IATA is also pessimistic. June demand (see table below) was up +7.4% on the previous year but the organisation says “the growth trend shows little promise”. Strong passenger growth to the end of 2011 has slowed continuously in 2012 and from May to June 2012 for example demand was up just +0.2%.


However, there appear to be anomalies in the market that defy explanation. European airlines for example experienced strong growth in June (+7.3%), well ahead of the May result (+4.3%) which, given the economic uncertainty in Europe, IATA believes “is more likely a result of volatility in weak market conditions”. The previous few months had seen the growth trend flatten out, after a solid +6% annualised growth rate from mid-2011 through the first quarter of 2012.


Source: IATA


North American airlines saw +1.6% growth in demand while capacity was cut by -0.3% compared to the previous June, pushing up load factors. Compared to May there was basically no growth with the region’s airlines reporting a -0.1% decline in demand. Asia-Pacific carriers reported a +6.0% growth in demand though, month-to-month, the demand in the region was basically flat at -0.1%. The growth trend here is similar to that of the overall market: from mid-2011 to the start of 2012, Asia-Pacific carriers saw +9.5% annualised demand growth which slipped back to +2% for the February to June period.


Middle East carriers were the strongest performers with demand growth of +18.2% outstripping a capacity expansion of +13.4%. In contrast to the overall market, the growth trend here has been robust throughout 2012, gaining a further +1.9% in June compared to May. Latin American airlines also performed well in June, recording a gain of +11.2% in demand compared to the previous year.


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