The International Air Transport Association (IATA) reported on Tuesday that global passenger traffic demand grew 5.3 percent in September compared with the same period a year earlier. This statistic reflects a positive growth trend for passenger demand even though the performance didn’t quite match August’s year-over-year rise of 6.3 percent, said IATA. September capacity rose 5.1 percent and load factor rose 0.2 percentage points, to 80.3 percent.
“Overall, demand for passenger travel is growing in line with expectations,” said IATA director general Tony Tyler. “We saw, however, some shifting of the sources of that growth in September, largely driven by economic factors. The strengthening of the U.S. and Asian economies was offset by weakness in Europe and Latin America...The three big stories in September were Europe, Russia and India.”
During September, European airlines reported 3.9-percent growth in international demand, reflecting a significant drop from the 7-percent increase reported in August. According to IATA, the results reflect the effect of the Air France crew strike and a general weakening of European economic prospects.
Meanwhile, year-over-year growth for Russian domestic demand fell to 5.6 percent in September from 10.1 percent in August. The effect of price stimulus wore off, said IATA, and the weakness revealed could amount to a first indicator of the economic effect of the Russia-Ukraine crisis.
In India, domestic travel spiked with a 26.3-percent growth rate in September—several times the 7.6-percent growth recorded in August as a result of price stimulation.
“It’s an interesting time for the global air transport industry, highlighting the complex vulnerabilities of the business,” said Tyler. “The fall in the price of oil is a good example. It is good news for an industry that spends a third of its operating budget on fuel. The full impact of the price drop will be realized only over time because of a time lag built into jet fuel pricing. And it could even be an indicator of difficulties ahead if the fall is driven by declining demand for oil rather than rising supply capacity.
“There are a lot of risks out there: growing weakness in key economies such as Europe and Brazil, the potential threat of Ebola to public confidence in flying, and the impact of political instability in various parts of the world,” he added. “The positive economic developments in Asia and the U.S. continue to underpin profitability. But it is a delicate balancing act.”
IATA anticipates that airlines this year will deliver an $18 billion net profit on revenues of $746 billion, resulting in a net profit margin of 2.4 percent. IATA plans to update the estimate and take a first look at 2015 profitability on December 10 at its Global Media Day in Geneva.
