Airlines: Heads above water
GENEVA, 1 February 2013: International Air Transport Association announced Thursday traffic data for 2012 showing a 5.3% year-on-year increase in passenger demand and a 1.5% fall for cargo.
The 5.3% increase in passenger demand was slightly down on 2011 growth of 5.9% but above the 5% 20-year average. Load factors for the year were near record levels at 79.1%. Demand in international markets expanded at a faster rate (6%) than domestic travel (4%). In both cases emerging markets were the main drivers of growth.
The 1.5% fall in demand for air cargo compared to 2011 marked the second consecutive year of decline, following a 0.6% contraction in 2011. The freight load factor for the year was 45.2%.
“Passenger demand grew strongly in 2012 despite the economic bad news that dominated much of the last twelve months. This demonstrates just how integral global air travel is for today’s connected world,” said IATA’s director general and CEO, Tony Tyler.
“At the same time, near-record load factors illustrate the extreme care with which airlines manage capacity. Growth and high aircraft use combined to help airlines deliver an estimated US$6.7 billion profit in 2012 despite high fuel prices. But with a net profit margin of just 1.0% the industry is only just keeping its head above water.”
The strongest growth in passenger demand came from emerging markets, particularly the Middle East (15.4%), Latin America (8.4%) and Africa (7.5%). Capacity grew more slowly than demand (4%) supporting a near record level international load factor of 78.9%.
Asia-Pacific carriers saw passenger growth of 5.2% in 2012 which was stronger than the 4% growth in 2011, though the 2011 figures were affected by the Japanese tsunami. After a slow start, the fourth quarter was boosted by a revival in the Chinese economy and strengthening momentum in Asian exports and imports. Capacity expansion of just 3% for the year kept the load factor at a healthy average of 77.5%.
European airlines’ passenger traffic expanded 5.3%, sharply down on the 9.5% growth of 2011. Growth was generated by the long-haul performance of Eurozone airlines. Additionally, around a quarter of the growth in European airline international traffic came from airlines outside of the Eurozone (Turkey being a major contributor). Capacity increased by 3.1%, pushing the full-year average load factor to 80.5%. Combined with other benefits of industry consolidation, the European industry broke even on the year—a much stronger financial performance than would be expected under such harsh economic conditions.
North American carriers reported the slowest international passenger growth of any region at 1.3% (down from 4.1% in 2011). Restructuring, consolidation, and tight capacity management (down 0.3% for the year) delivered the highest load factor (82%), contributing to an estimated US$2.4 billion profit.
Middle East airlines contributed almost a third of the expansion in international passenger markets with 15.4% growth. This was achieved with a capacity expansion of 12.5% while improving the load factor to 77.4%. The region’s carriers increased the connectivity of their expanding hubs with significant increases in both destinations and frequency.
Latin American carriers recorded 8.4% demand growth in 2012. This was the second-strongest performance (after the Middle East) and was supported by rising incomes and falling unemployment in the region (particularly Brazil). Capacity expanded more slowly than demand (7.5%) and the load factor stood at 77.9% for the year.
African airlines had a solid year of growth, up 7.5%, as the continent’s economic expansion drove traffic demand. Capacity expansion of 7.1% was just below traffic growth. This improved the load factor to 67.1%, but it was still the weakest of all regions.
“We are entering 2013 with some guarded optimism. Business confidence is up. The eurozone situation is more stable than it was a year-ago and the US avoided the fiscal cliff. Significant headwinds remain. There is no end in sight for high fuel prices … 2013 will not be a banner year for profitability, but we should see some improvement on 2012,” said Mr Tyler.
In its December outlook for 2013, IATA projected that 2013 would see 4.5% growth in passenger markets and 1.4% growth for cargo demand. That will contribute to an improvement in profitability from US$6.7 billion (1.0% net profit margin) in 2012 to US$8.4 billion (1.3% net profit margin) in 2013.