Economic Growth reflected in Strong Passenger and Freight Demand

The International Air Transport Association (IATA) recently released international traffic data for May 2006 showing 7% growth in passenger demand and 5.1% growth for freight over the same period in 2005. Load factor for May achieved an average of 73.6%.

“Strong economies are supporting strong demand growth for both freight and passenger traffic. This positive demand environment is helping the global airline industry to offset some of the sharp increase in jet fuel prices. And it is helping airlines boost revenues by an average of 10% over the past three years,” said Giovanni Bisignani, IATA’s Director General and CEO.

International passenger traffic grew 7% year on year, in May, down from the 9.9% growth in April when traffic was artificially boosted by the “Easter effect.” However, the 7% growth represents a pick-up in the underlying growth rate, helping to boost growth in the year to date to an above average 6.8%. Airlines are also benefiting from improved capacity utilisation. Capacity expanded by only 4.9%, driving load factors to 73.6%, which is 1.4% higher than in May 2005. For the first five months of the year, the Middle East continued to lead growth with a 17.8% increase over the same period in 2005.

International freight traffic grew 5.1% year on year, in May, down from the 6.1% seen in April. A fall in freight traffic in Latin America – largely due to the problems and lower volumes at Brazilian carrier Varig – was the main factor behind the slowdown in the overall growth rate. Excluding Varig, other Latin American airlines were on track with 5% growth in May, similar to the global average. Overall, freight traffic remains on course to grow by at least double the 2005 rate, and we forecast growth of 7% for 2006 as a whole. For the first five months of the year, Middle Eastern carriers lead growth at 19.6%, followed by North America (6.5%), Latin America (5.3%) and Asia Pacific (5.2%) with African and European carriers at 3.8% and 2.1% respectively.

“Airlines continue to cut costs and improve efficiency but we must not let the strong revenue environment distract us from further change. Although load factors are at historically high levels, we need to continue to manage capacity carefully to make sure that record aircraft orders do not become our Achilles heel. There is a risk that high oil prices and rising interest rates in many major economies will trigger an economic slowdown later this year, removing the support provided by demand-led revenue growth. That is why even more efficiency and greater change are needed,” said Bisignani.

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