Global passenger traffic growth slips to 5.3%

Singapore

GLOBAL passenger traffic growth corrected in September by easing slightly to 5.3 per cent year on year, down from a robust 6.3 per cent expansion in August.

Overall, demand growth is in line with expectations, though a strengthening in certain regions - such as the US and Asia-Pacific - is being offset by emerging weakness in others, such as Europe. The monthly passenger traffic report by the International Air Transport Association (Iata) showed that global capacity expanded by a slightly slower 5.1 per cent, pushing load factor up 0.2 percentage points to 80.3 per cent.

"Demand conditions are improving in the US and are relatively better in Asia-Pacific compared to earlier in 2014. This should help offset some adverse developments in other parts of the world, including the recent faltering of the eurozone economic recovery," Iata said.

For the Asia-Pacific, international traffic growth expanded by 4.8 per cent owing to a resurgence in trade activity - which bolstered business travel - as well as a pick-up in the Chinese economy. At 7.2 per cent, capacity growth outpaced that of traffic, pushing passenger load factor downwards to 76.2 per cent.

The Middle Eastern carriers chalked up the biggest growth in traffic for the international markets, with double digit expansion of 15.8 per cent. Traffic growth in that region is underpinned by robust performances by regional economies as well as staunch demand for premium seats. Export orders too have been expanding since early this year.

North American airlines saw international demand rise 2.1 per cent, though trends in business activity are positive and trade volume growth is speeding up, which spells good news for corporate international travel. And Latin American airlines posted growth of 4.6 per cent, slowing from 8.3 per cent in August.

"Growth in the Brazilian economy remains fundamentally weak and recent indicators of growth and business activity are showing signs of further weakness, but regional trade volumes have been improving," highlighted Iata.

In Europe, traffic growth slowed to 3.9 per cent - versus 7 per cent in August - as the eurozone recovery loses steam as well as the Russia-Ukraine crisis (and the accompanying EU sanctions) impacts major European economies.

On the domestic passenger markets, demand was up 5.3 per cent, while capacity rose 4 per cent which nudged up load factor by one percentage point to 80 per cent. The strongest growth was seen in India (26.3 per cent) and China (8.6 per cent).

Meanwhile, in Russia, domestic traffic growth dropped to 5.6 per cent in September, possibly pointing to the first signs of an economic slowdown owing to EU sanctions.

But even as the industry wrestles with increasing weakness in key regions such as Europe as well as the Ebola virus, one bright spot is falling oil prices since jet fuel is a major expense for carriers.

"It is good news for an industry that spends a third of its operating budget on fuel," said Iata chief Tony Tyler, though he went on to add that the real impact of easing prices will only be realised in time because of the lag built into jet fuel pricing.