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IATA Reports Air Passenger Demand Slowdown in August

04-10-2011

By Kate Rice

IATA Reports Air Passenger Demand Slowdown in August
By Kate Rice

Air traffic demand continues to grow but at a slower pace, according to the International Air Transport Association’s latest figures for August. Passenger demand during the month was up 4.5 percent over the previous August, representing a significant slowing from the 6 percent increase recorded in July.

Comparisons of July to August more clearly indicate the slowdown, according to IATA. The total passenger market fell by 1.6 percent in August compared to July. International markets declined by 1.8 percent, while already weak domestic markets shrank by 1 percent. The total cargo market fell by 1.3 percent.

Passenger load factors were high at 81.4 percent, almost as high as in July. IATA said that while this is close to historically high levels reflecting the industry’s ability to efficiently allocate capacity, it also showed weakness -- falling by 1.3 percent compared to July.

European airlines saw the strongest growth in international passenger traffic in August with a 7.9 percent increase, just slightly below a capacity expansion of 8.2 percent. Although domestic economies and leisure travel are weak, strong exports have led to increased business travel on international markets.

North American carriers reported the weakest performance with growth of just 2.9 percent, which was partly a result of equally slow growth in capacity. This is a sharp downturn from stronger growth earlier in the year, as reflected in the 5.6 percent year-to-date demand expansion. The region’s carriers posted the highest load factor at 86.1 percent.

Year-to-date domestic demand is up 3.6 percent over 2010. However, domestic demand in August shrank by 1 percent compared to July, which brought the August 2011 growth rate down to 1.5 percent. The largest source of weakness in absolute terms was the 0.3 percent fall in the U.S. compared to the previous year. U.S. domestic travel accounts for about half of all domestic travel.

IATA said August traffic results are in line with expectations for a decline in profitability heading into 2012. Airlines are expected to see total industry profits fall from $6.9 billion in 2011 to $4.9 billion. Historically, the airline industry has delivered collective losses when GDP growth (measured using current exchange rates) falls below 2 percent. GDP growth has fallen from 3.9 percent in 2010, to an expected 2.5 percent this year and 2.4 percent is projected for 2012.

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