The International Air Transport Association (IATA) reported on Wednesday that full year 2011 passenger demand rose 5.9 per cent compared to 2010, in line with long-term growth trends. In contrast, cargo markets contracted by 0.7 per cent for the year; but recorded positive demand growth in December of 0.2 per cent. Growth in demand lagged capacity increases at 6.3 per cent (passenger) and 4.1 per cent (cargo) putting downward pressure on load factors. The average passenger load factor for 2011 was 78.1 per cent, down from 78.3 per cent in 2010, while the freight load factor was just 45.9 per cent, down from 48.1 per cent in 2010. "Given the weak conditions in Western economies the passenger market held up well in 2011. But overall 2011 was a year of contrasts. Healthy passenger growth, primarily in the first half of the year, was offset by a declining cargo market. Optimism in China contrasted with gloom in Europe. Ironically, the weak euro supported business travel demand. But Europe's primarily tax and restricted approach to aviation policy left the continent's carriers with the weakest profitability among the industry's major regions. Cautious improving business confidence is good news. But 2012 is still going to be a tough year," said Tony Tyler, IATA director general and CEO. Passenger demand for December rose 5.4 per cent compared to the same month in 2010. But the trend since mid-year has clearly slowed, as travel markets react with a lag to the decline in confidence that weakened cargo in the second half of 2011. Comparisons with December 2010 are also distorted as severe winter weather in Europe and North America as well as strikes in Europe suppressed demand. December 2011 passenger demand was up just 0.7 per cent over November while the load factor declined 0.2 percentage points. Freight capacity climbed 4.4 per cent in December compared to December 2010. The freight load factor was just 46.1 per cent for the month. International air travel rose 6.9 per cent last year, reflecting the strong growth of 6.2 per cent recorded between February and July, compared to 1.2 per cent between September and December. International capacity climbed 8.2 per cent, pushing the passenger load factor down to 77.4 per cent. For December, international traffic climbed 6.4 per cent year over year, in part owing to depressed traffic levels in 2010 in North American and Europe, and rose 1.4 per cent compared to November. European carriers posted the second highest growth rates, behind Latin American carriers. Demand rose 9.5 per cent last year while capacity climbed 10.2 per cent, resulting in a load factor of 78.9 per cent. December traffic rose 9.8 per cent but this was surpassed by a 10.3 per cent rise in capacity. Europe's strong performance is somewhat surprising in light of the European sovereign debt crisis; however European airlines have benefited from robust business travel on long-haul markets, in part related to strong exports from Northern Europe. North American carriers had the industry's highest load factors for both the year at 80.7 per cent, and the month of December at 80.5 per cent. These figures demonstrate tight capacity management, as the industry coped with demand increases of just 1 per cent for December and 4 per cent for the year. Nevertheless, capacity still expanded a little faster than demand, with increases of 1.4 per cent in December and 6 per cent for the year, so load factors were not quite as high as in 2010. Latin American airlines led the industry in traffic growth in 2011 with a 10.2 per cent rise in demand compared to 2010. This also was the only region in which demand growth outstripped capacity growth for the full year, with capacity up 9.2 per cent. However, December's strong traffic growth of 8.8 per cent was exceeded by an 11.1 per cent rise in capacity. Latin America air traffic is supported by healthy domestic economic conditions and trade activity with North America and Asia. Middle Eastern carriers' traffic rose 8.9 per cent for the year, against a 9.7 per cent climb in capacity, putting pressure on load factors, which at 75.4 per cent, was the lowest except for Africa. However, December ended on a more positive note, with traffic up 11.7 per cent against an 11 per cent rise in capacity and a load factor of 77.1 per cent. Airlines in this region have slowed the pace at which they have expanded but price competitive products and geographically well-positioned hubs are enabling Middle East carriers to continue to improve their share of long-haul markets. Asia-Pacific airlines experienced the widest traffic/capacity gap for the year, with annual traffic up 4.1 per cent versus a 6.4 per cent climb in capacity. A significant part of this slowdown was due to the earthquake and tsunami in Japan, the impact of which on air travel should be temporary. However, the sharp fall in air freight in the region as Western demand for manufactured goods declined also reduced some business travel for the region's airlines. The average load factor was 75.9 per cent. In December, demand climbed 3.7 per cent and capacity rose 5.9 per cent producing a 74.7 per cent load factor. African airlines saw travel demand fall 0.7 per cent for December, but it rose 2.3 per cent for the full year. This relatively weak performance was in part owing to the civil unrest in a number of North African countries. However, good economic performance in the region was also generating significant demand for air travel. African airlines were unable to fully benefit and their low growth represents a loss of market share. Capacity climbed just 0.2 per cent for December and 4.4 per cent for the 12 months. Load factors were the weakest in the industry at 68.9 per cent for December and 67.2 per cent for the full year. Passenger demand in domestic markets for the full year rose 4.2 per cent compared to a 3.1 per cent rise in capacity, leading to a load factor of 79.3 per cent. December demand rose 3.7 per cent from a year earlier; however, this represented a 0.5 per cent decline from November. It is not clear yet whether this signals a new trend or is just an anomaly. Individual markets varied dramatically in their performance. Air freight markets turned up at the end of the year after shrinking through much of the summer and autumn as business confidence across major economies, and export orders, slumped. "Improving business confidence and encouraging news from the US economy are heartening developments. But it is far too early to start predicting a soft landing for 2012. The euro zone crisis is far from over. Failure to achieve a durable solution will have dire consequences for economies around the world. And it would most certainly tip the airline industry into the red," said Tyler. "Airlines have made massive investments in new fuel-efficient, environmentally friendly aircraft. The challenge is to deploy them profitably into a dynamic and uncertain market. Governments, meanwhile, need to take a strategic view of the airline industry that recognises its value as a catalyst for economic growth. Airlines transport about 3 billion people a year. And over a third of the value of goods that are traded internationally are transported by air. Getting people and goods to their destinations more efficiently improves competitiveness. Infrastructure investments to enable aircraft to land and takeoff with a minimum of delay and fly the most fuel and carbon efficient trajectories will return a far greater payout to global GDP than shortsighted and narrowly-focused tax grabs. Let's hope that 2012 will be the year when politicians put the required political capital behind important projects such as the Single European Sky and NextGen in the US," said Tyler.
