International scheduled air traffic showed continued strengthening of demand in February 2010, according to data compiled by the International Air Transport Association(IATA). Compared to February 2009, passenger demand was up 9.5%, while cargo demand grew 26.5%.
These are strong gains, but it must be noted that February 2009 marked the bottom of the cycle for passenger traffic during the global economic recession. Passenger demand must recover by a further 1.4% to return to pre-crisis levels. Cargo hit bottom in December 2008, with little improvement realized by February 2009. Cargo traffic, which plunged much further than passenger demand, has a further 3% to recover in order to return to pre-crisis levels.
“We are moving in the right direction,” says Giovanni Bisignani, IATA’s director general and CEO. “In two to three months, the industry should be back to pre-recession traffic levels. This is still not a full recovery. The task ahead is to adjust to two years of lost growth.”
The highlight for February was improved load factors, which stood at 75.5%. Considering that February is traditionally the weakest month for travel, and if seasonally adjusted, this translates to an all-time record February load factor of 79.3%. While demand increased by 9.5%, supply was held back to just 1.9%. Airlines are maintaining normal aircraft utilization on short-haul fleets, but long-haul utilization is down over 8% compared to 2008 levels. The resulting increase in unit costs for long-haul operations may delay the positive impact of stronger demand to the bottom line.
International Cargo Demand
European airlines are benefiting least from the strong upturn in air freight volumes, with year-on-year growth of just 7.2% in February, compared to 26.5% on average. Despite the sluggish U.S. economy, North American airlines have seen a rebound (+34.1%) equivalent to those experienced by Asia-Pacific (+34.5%) and Latin American airlines (+41.9%). While US GDP expanded at 5.9% during the fourth quarter, consumer spending was up just 1.7%. The bulk of the expansion is attributed to businesses restocking inventories.
The global strong air freight upturn has been largely driven by the business inventory cycle. We can expect this part of the cycle to wear-out in the second half of the year when inventories reach normal levels, IATA reports. From that point, we can expect slower growth as air freight will be driven by consumer spending and world trade growth.