News
IATA reports strong demand continues

Compared to July 2009, international passenger demand was up 9.2 per
cent while international scheduled freight traffic showed a 22.7 per
cent improvement.

hese year-on-year comparisons for July were less than the June growth
data showing 11.6 per cent and 26.6 per cent increases for passenger and
cargo traffic, respectively. The apparent slowdown was entirely due to
the fact that by July 2009 traffic was already starting to recover.
After adjusting for seasonality, the improvement in demand was faster
month-to-month in July than it was in June.

It is clear that the recovery has entered a slower phase. During the
second half of 2009, demand was rebounding at an annualized rate of 12
per cent for passenger and 28 per cent for cargo. In the year to July,
the annualized growth rates had dropped to 8 per cent for passenger and
17 per cent for air freight.  However, this is still considerably above
the industry’s traditional 6 per cent growth trend.

“The recovery in demand has been faster than anticipated. But, as we
look towards the end of the year, the pace of the recovery will likely
slow. The jobless economic recovery is keeping consumer confidence
fragile, particularly in North America and Europe. This is affecting
leisure markets and cargo traffic. Following the boost  of cargo demand
from inventory re-stocking, further growth will be largely determined by
consumer spending which remains weak,” said Giovanni Bisignani, IATA’s
Director General and CEO.

Passenger
• July global passenger traffic was 3 per cent higher than the pre-crisis levels of early 2008.
• Asia-Pacific carriers outperformed the industry average with a 10.9
per cent growth in July. This is consistent with the region’s 10.6 per
cent growth measured year-to-date. A July capacity increase of less than
half the demand growth (5.1 per cent) pushed load factors higher.
Leading the industry recovery, the region’s carriers are expected to
report a profit of US$2.2 billion. This will be the largest gain in
dollar terms in 2010 compared to 2009.
• European airlines, beleaguered by the region’s weak economy, saw
little growth when the recovery took off in the second half of 2009.
These airlines are now benefiting from long-haul expansion in 2010.  In
July, passenger demand was up by 6.2 per cent over the same month in
2009. But the region’s slow start in the recovery process has seen it
deliver the weakest demand performance among all the regions over the
first seven months of the year (+3.6 per cent).
• North American carriers recorded a 7.9 per cent improvement in
passenger demand in July over the same month in the previous year. Over
the first seven months of the year, the region’s carriers recorded a 6.3
per cent increase, but kept capacity expansion to just 1.0 per cent,
raising load factors to 82.0 per cent and producing strong gains in unit
revenues that will support the region’s return to profitability this
year.
• African airlines are now benefiting significantly from the economic
and travel upturn, outperforming the industry with 13.0 per cent growth
in passenger demand in July, which is consistent with the year-to-date
improvement of 13.1 per cent. Capacity is quickly coming back into the
market with a 10.4 per cent increase in July, limiting improvements in
both load factors and financial performance.
• Latin American carriers outperformed the global average with passenger
growth of 14.2 per cent in July (10.9 per cent for the first seven
months of the year). Faster capacity additions have seen load factors
drop, which will limit gains in financial performance.
• Middle Eastern carriers continue to add the largest amount of capacity
(12.8 per cent in July and 13.2 per cent over the first seven months of
the year). The region’s carriers have managed to increase demand at
even higher levels (16.8 per cent in July and 19.4 per cent over the
first seven months of the year). Load factors and financial performance
will record improvements this year.

Cargo
• July global cargo demand was 4 per cent higher than pre-crisis levels in early 2008.
• A slowdown in air freight markets is expected in the second half of
the year as the economic cycle moves into a new phase. Extraordinary
freight growth rates in late 2009 and early 2010 were supported by
businesses re-stocking their inventories. With the re-stocking cycle
completed, air freight demand will be driven by consumer spending and
business capital expenditure. Weak consumer confidence in Europe and
North America will be a negative factor. But strengthening corporate
profits are supporting an increase in capital expenditure that could
continue to drive robust freight growth.
• The two-speed recovery continues to see weak growth by European
carriers of 12.1 per cent in July, less than half the 25.3 per cent
increase by Asia-Pacific carriers or the 27.1 per cent growth recorded
by North American carriers.

“Improving demand is an important component of the recovery. But it must
translate to the bottom line. The anticipated 2010 profit of $2.5
billion is only a 0.5 per cent return on revenues. Hence, the financial
situation of the industry remains fragile. We must go beyond recovery to
secure sustainable profitability at levels exceeding the 7-8 per cent
cost of capital. For this, we need a change in the industry’s
structure,” said Bisignani.

“Costs are a critical element. This year has been marked by strikes and
threats of strikes at airlines, and with airports and air navigation
service providers. Avoiding strikes at BAA and AENA, Spain’s provider of
air navigation services, were major accomplishments. We are all in this
together—including all our partners in the value chain and those who
work in this financially fragile industry. It is not the time for
strikes. We must work together to secure our future by finding solutions
to reduce costs,” said Bisignani.

Bisignani also noted the need for a regulatory structure that
facilitates consolidation across political borders. “The crisis has seen
consolidation in Europe and the US. This month’s merger announcement by
LAN and TAM brings Latin America into the picture. And trans-national
brands are serving customers effectively in many parts of the world. But
we remain an industry of over a thousand players with only very limited
opportunities to consolidate as a result of the antiquated bilateral
system’s restrictions on ownership. The business realities of the
industry are changing. It is critical that governments find a modern
regulatory structure that is free of outdated ownership restrictions and
able to facilitate opportunities for consolidation globally—something
that other industries take for granted,” said Bisignani.

View full July traffic results