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African airlines, others record growth in cargo, passenger traffic

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THE global air transport report has revealed that African African airlines, others record growth in cargo, passenger trafficairlines have recorded a growth of 4.9 per cent, which reversed the year-on-year contraction experienced in June, according to the International Air Transport Association (IATA). However, with the capacity rising up to 4.5 per cent, the load factor improved slightly to 70.2 per cent. Currently, the biggest factor impacting international traffic demand in July was the slowdown of the South African economy, coupled with the Ebola outbreak in West Africa, which intensified towards the end of July, the impact of which may likely be seen in August. Also, with the released data for global airfreight markets have showed a strong increase in air cargo in July. Compared to July 2013, freight tonne kilometers (FTKs) that rose to 5.8 per cent.

To IATA, it was acceleration in growth from June when cargo demand grew at less than half that rate of 2.4 per cent. The strong growth mirrors positive developments in some key regional economies. After a slowdown at the start of the year, global business confidence and trade are showing signs of improvement again, especially in Asia-Pacific. Global air cargo volumes have now surpassed their previous July peak, in 2010, and look set to continue to increase. European airfreight, however, grew just 1.8 per cent. This was reflected on the effects of the Russia-Ukraine crisis (including the impact of mounting economic sanctions), which has added to economic weakness in the Eurozone. “Overall, July saw growth accelerate. That’s good news and it reflects the continued strengthening of business confidence at a global level. But the air cargo industry is moving at two speeds with a sharp divide in regional performance. European carriers reported anemic growth of just 1.8 per cent while all other regions reported solid gains of 5 per cent or more on the previous year.

“In particular, the 7.1 per cent growth reported by airlines in Asia-Pacific is encouraging as it demonstrates a recovery in trade and a positive response to China’s economic stimulus measures,” said the Director General and Chief Executive Officer, IATA, Tony Tyler. IATA has also stated that the global passenger traffic results for July have showed demand growth of 5.3 per cent over the previous July. Capacity expanded exactly in tandem with demand with 5.3 per cent, resulting in a global load factor of 82.3 per cent, unchanged from last year. Tyler added: “July was another strong month of growth for air travel. People are connecting by air in ever-greater numbers. That’s true across all regions. Despite the various economic challenges, the outlook for passenger travel remains broadly positive. The overall sluggishness at the beginning of the year appears to be behind us with growth in China and other emerging economies offsetting recent deterioration in the Eurozone”.

According to the body, the July international passenger demand rose by 5.5 per cent compared to the same month in 2013. This was outstripped by a capacity expansion of 6.2 per cent, which resulted in a slight weakening of the load factor to 81.9 per cent. European carriers reported growth of 5.3 per cent in July compared to a year ago. Capacity expanded slightly more aggressively at 5.6 per cent, but the region still reported a very high load factor of 85.1 per cent. While this was a robust performance, latest indicators showed a weakening in key European economies such as Germany reflecting the impact of sanctions associated with the deepening Russia-Ukraine crisis.

Asia-Pacific airlines are also benefitting from an improved economic environment. As demand growth was slightly above the global average at 5.6 per cent, which lagged a capacity increase of 6.8 per cent. Load factor fell 0.9 percentage points to 78.9 per cent. Therefore, the biggest factor affecting demand developments has been the response of the Chinese economy to stimulus measures, which saw year-on-year GDP growth reach 7.5 per cent in July. North American airlines saw international demand grow by 2.9 per cent, the slowest of all regions. Capacity expansion was nearly double that at 5.6per cent; nonetheless the load factor stood at 85.1 per cent, as the overall business conditions are the strongest since mid-2010, which bodes well for the region’s carriers. Also, Latin American carriers have reported growth of 6.7 per cent in line with a 6.6 per cent capacity increase. Load factors stood at 82.5 per cent.

The association noted that robust economic performance in Colombia, Peru and Chile was being offset by weakness in Brazil, pointing that, regional trade volumes are not expanding, the impact of which has been a dialing down of travel demand from the 8 per cent growth range experienced in 2013. Airlines in the Middle East recorded the strongest growth at 9.2 per cent, which was ahead of a capacity expansion of 8.2 per cent. The load factor rose to 0.7 percentage points to 78.0 per cent. The carriers are benefitting from the strength of regional economies and solid growth in business-related premium travel. Demand on domestic routes rose by 4.9 per cent in July over the previous year, ahead of a 3.5 per cent capacity increase, pushing load factor up 1.1 percentage points to 83.0 per cent. The strongest growth was recorded in China 8.8 per cent and Russia 9.9 per cent respectively. As a result, Russian airlines saw the strongest growth rate among major domestic markets at 9.9 per cent. While the Russia-Ukraine crisis has seen a slowdown in the Russian economy, domestic demand grew as a result of a significant reduction in fares.

As other carriers, India’s domestic market recorded growth by a solid 6.0 per cent in July over the previous year. This could be an early sign of the success of the new government’s business-friendly stance, said IATA. However, the government’s July budget announcement showed little spending stimulus, which could keep India’s growth trend below the pace of other emerging markets, it stated, “Airlines reported growth in July, which is a positive story for the global economy. Robust economic conditions support the expansion of travel. In turn connectivity stimulates economic growth and creates jobs. It’s a tried and tested virtuous circle. And the expectation is for continued solid growth over the remainder of 2014”. “We cannot ignore, however, the risks that could de-rail this trajectory. The Ebola outbreak in West Africa, weakness in the Eurozone, hostilities in Eastern Ukraine and instability in the Middle East loom large. Airlines are on track to record a profit of some $18 billion this year. But that is a net profit margin of just 2.4 per cent, which does not provide much of a buffer. So it is critical that governments shore-up connectivity with business friendly policies based on reasonable taxation, cost-efficient infrastructure and smart regulation,” said Tyler.


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