Notwithstanding the challenges emanating from soaring fuel prices and fragile global economic landscape, the international air travel burgeoned well in November, as revealed by IATA Air Transport Market Analysis. This is the second month of increase, after a period of continued decline since late 2011.
Both air freight and passenger traffic touted a YoY growth of 1.6 percent and 4.6 percent respectively with profits and cash flows standing at the levels akin to 2006 when the fuel prices were at least 45 dollars per barrel lower than the current price and the economic growth tallied four percent as against the present growth rate of two percent. Passenger capacity also edged up by 3.2 percent and load factor improved one percentage point to 77.3 percent compared to the year-ago level.
"The key reason to mushrooming profit and growth numbers is the efficiency achieved via restructuring," said Tony Tyler, Director and CEO, IATA.
Recent joint ventures and alliances have allowed airlines to achieve economies of scale, thus offering competitive rates and more choice to the passengers. Moreover, a significant drop in the number of new entrants due to funding dearth for the startups and a number of bankruptcies filed by some non-performers has enabled the industry to garner improved efficiency for themselves and superior returns for investors.
IATA highlights that part of the growth also comes on the heels of improved consumer confidence in the US and the rising shift towards online shopping which greatly depends on air cargo for delivery.
Looking into passenger markets details, international passenger market rose by 5.6 percent YoY, while domestic passenger market recorded a growth of three percent over the last year mark. In contrary to the year on year comparisons, MoM tally portrays a different picture with international market posting a meager uptick of 0.2 percent and domestic market rebounding by just 1.2 percent. This gives an indication that the annual growth numbers are somewhat puffed up as severe floods that hit Thailand last year severely affected air transport in November last year.
Amongst the international markets, airlines operating in the developing markets proved to be the major growth propellers. Latin American and Middle Eastern airlines witnessed international passenger travel increase by 11 percent and 10.5 percent respectively, with carriers in both regions responding to vigorous demand by improving their capacity. In contrast, stringent capacity management by the US airlines restricted demand growth, producing the smallest rise among regions in international travel in November.
Talking about the domestic markets, China occupies the forefront by touting a YoY boom of 7.7 percent. On the flip side, slowing economy and tumbling business confidence in India took its toll on its passenger market which plunged by 6.5 percent YoY.
Going ahead, IATA announced an upward revision to its industry financial outlook to 8.4 billion dollars in 2013 (marginally up from the 7.5 billion dollars forecast released in October). However, industry net post-tax margin is expected to remain weak at 1.3 percent in 2013.
Air transport sector providing jobs to more than 57 million people and supporting 2.2 trillion dollars in economic activity is crucial to shore up economic growth and development. Thus, the government should gear up to resolve barriers to connectivity by addressing excessive taxation, soaring infrastructure costs, arduous regulation as well as improving the capacity and efficiency of airports and air navigation services.