PREMIUM TRAFFIC MONITOR MAY 2015 KEY POINTS

Transcription

1 PREMIUM TRAFFIC MONITOR MAY 2015 KEY POINTS Passenger travel on international markets rose 6.2% in May compared to a year ago, accelerating on the 3.8% increase in April. Economy class travel grew at a stronger rate than premium international air travel, and although the growth was spread across most key markets, it was largely driven by the within Europe market; Economy class travel rose 6.4% in May year-on-year, a pick-up on April growth of 4.2%. The strong growth in economy class leisure travel the more price sensitive travel market is being supported by lower fares. Premium travel also rose in May, but at a slower (4.1%) rate. This reflects continued weakness in business travel demand drivers, with global business confidence being dragged down by emerging markets; The key driver of the faster growth in international air travel is acceleration on the within Europe market. In May, the market was up 5.1%, almost double the rate of growth seen year-to-date, supported by gains in business confidence which confirm that the economic recovery is on track; Looking ahead, although adverse economic developments in some emerging markets continue to present downside risks for growth in international air travel, better conditions in advanced economies are likely to sustain the recent acceleration in passenger numbers; Economic weakness in Asia from declines in trade activity could lead to deterioration in business related air travel for that region. That said, there has been no sign of weakness in demand so far. By contrast, improvements in the Eurozone are already translating to stronger demand for travel in both premium and economy classes. Looking at international air passenger volumes (first chart above) reveals early signs of improvement, particularly for economy passenger numbers. The increase in economy class volumes has been supporting by the fall in oil prices, which has led to lower fares. Economy class leisure travel is more price sensitive than business related premium class travel. Gains in premium passenger numbers have been dampened by overall weakness in business travel demand drivers. That said, positive economic momentum in some regions has supported stronger travel demand on some key markets. Most notably, data show a pick-up in business confidence in the Eurozone. It is important to note, however, that developments in emerging markets present a downside risk to growth in business-related international air travel for the coming months. Business activity in those economies has dipped into contractionary territory for the first time in 12 months.

2 In 2013 and during earlier parts of, when premium travel was expanding at a faster pace than economy travel, there was a boost to the share of premium travel from total travel. This was positive for yield growth and revenues. That trend has reversed during the recent past, placing downward pressure on the share of premium seats from the total. At the same time, a rebound in economy class travel has also contributed to a fall in premium s share of total travel. Economy class leisure travel, the relatively more price sensitive travel market, has been given a boost by falling fares. Even though there has been no marked gain in premium s share of total traffic, growth on longer-haul markets has been robust. This has helped support premium yields on some markets, which in turn has supported the financial performance of the longer-haul network airlines, compared to shorter-haul mainly leisure travel focused airlines in some, though not all, regions. The profile of air travel growth shows an improvement in Q2, driven by better demand conditions in some regions. In early 2015, we were seeing the negative impacts of earlier economic developments. World trade and industrial production accelerated during parts of, but that trend failed to continue through to the end of the year the lagged impact of that weakness in late had been showing up in the sluggish growth trend for premium travel earlier this year. However, recent improvements in advanced economies, in particular in Europe, show that the economic recovery in that region is on track, and we are now starting to see the positive impacts on air travel. 2

3 TRAFFIC GROWTH BY MAJOR ROUTE Results for the within Far East market remain robust, up 13.8% year-on-year, despite weakening economic growth in some key economies and declines in trade to/from the region. In China, a slump in Chinese export has weakened manufacturing for the past several months, and trade to/from the region overall was down 10% in Q1 compared to Q4. Although early Q2 trade data suggests that weakness in trade could be bottoming out, forward-looking indicators like exports orders show further weakness ahead. Economic conditions in the Eurozone remain fragile in the midst of on-going troubles with the Greek economy, but there have been some positive developments with June data showing increases in business activity. Efforts by the ECB to stimulate economic growth have led to an improvement in business and consumer sentiment in the region, and this has now started to translate to stronger demand for air travel with the region. Premium travel growth within Europe was up 7.6% in May year-on-year, and economy class travel rose 5.0%, both well above their respective trends year-todate. Markets connected to the Middle East have also seen solid growth over recent months, particularly in premium class. Premium travel on Africa Middle East, Europe Middle East and Middle East Far East all increased strongly in May year-on-year (22.8%, 7.1% and 8.3%, respectively). Major economies in the Middle East, including Saudi Arabia and the United Arab Emirates, have seen notable declines in non-oil sectors in Q (Markit), but the rates of growth remain robust and this should help sustain solid growth in air travel demand to/from the region. IATA Economics Conctact: Julie Perovic perovicj@iata.org 21 st July

4 ANNEX: TRAFFIC GROWTH BY ROUTE MAY 2015 Premium Traffic Growth May 15 vs. May YTD 2015 vs. YTD Economy Traffic Growth May 15 YTD 2015 vs. May vs. YTD Total Traffic Growth May 15 vs. May YTD 2015 vs. YTD Africa - Far East -27.0% -15.0% -13.9% -11.1% -15.3% -11.4% Africa - Middle East 22.8% 10.1%.3% 7.0% 15.0% 7.3% Europe - Africa -5.4% -5.3% -0.4% -1.7% -1.0% -2.1% Europe - Far East -1.3% 2.5% 4.7% 4.2% 3.9% 4.0% Europe - Middle East 7.1% 7.1% 9.9% 6.6% 9.6% 6.7% Far East - Southwest Pacific 2.3% 5.9% 8.1% 6.8% 7.4% 6.7% Mid Atlantic 6.4% 9.3% 5.5% 5.0% 5.6% 5.4% Middle East - Far East 8.3% 7.8% 6.0% 6.1% 6.2% 6.3% North America - Central America 0.6% 2.4% 7.9% 6.9% 7.2% 6.5% North America - South America -7.7% -7.7% -5.4% -4.2% -5.7% -4.6% North and Mid Pacific 4.6% 3.1% 8.1% 6.1% 7.5% 5.6% North Atlantic 2.9% 3.2% 3.4% 2.1% 3.3% 2.3% Other routes 5.2% -1.0% 7.9% 5.3% 7.6% 4.7% South Atlantic -4.4% -0.9% 0.5% 0.3% -0.1% 0.1% South Pacific 8.1% 0.4% 5.7% 4.0% 6.0% 3.5% Within Africa -6.9% -5.1% -4.9% -3.9% -5.1% -4.0% Within Europe 7.6% 4.6% 5.0% 2.4% 5.1% 2.6% Within Far East 9.5% 9.7%.1% 11.4% 13.8% 11.3% Within North America 8.4% 3.3% 15.4% 8.4%.8% 8.0% Within South America 2.8% 1.4% 6.1% 7.2% 5.9% 6.8% Total 4.1% 3.7% 6.4% 4.7% 6.2% 4.6% Source: IATA Origin-Destination Statistics PREMIUM TRAFFIC BY ROUTE PREVIOUS MONTH Share of Premium Share of Total Traffic Revenues Traffic Revenue Africa - Far East 0.6% 0.8% 7.9% 25.8% Africa - Middle East 1.8% 1.2% 7.3% 24.4% Europe - Africa 3.8% 7.0% 6.5% 34.5% Europe - Far East 9.1% 13.7% 10.2% 40.5% Europe - Middle East 5.1% 5.8% 10.1% 44.2% Far East - Southwest Pacific 2.6% 3.0% 7.8% 27.8% Mid Atlantic 1.4% 1.9% 7.8% 31.2% Middle East - Far East 3.1% 2.1% 4.5% 16.0% North America - Central America 3.9% 1.9% 4.3% 10.7% North America - South America 2.4% 3.2% 11.4% 32.3% North and Mid Pacific 5.6% 11.7% 12.7% 40.0% North Atlantic.0% 23.0% 13.9% 50.9% Other routes 6.1% 4.7% 7.6% 26.1% South Atlantic 1.9% 3.0% 11.6% 36.0% South Pacific 0.8% 2.0% 11.9% 39.8% Within Africa 1.5% 0.6% 7.6% 20.4% Within Europe 17.7% 4.8% 2.9% 9.7% Within Far East 17.1% 8.9% 5.3% 15.9% Within North America 0.7% 0.5% 2.0% 7.1% Within South America 0.8% 0.4% 4.8% 10.6% Total 100.0% 100.0% 5.9% 27.9% Source: Diio, IATA

5 International Premium Traffic Growth by Route - % Growth 30% 20% 10% 0% -10% -20% -30% Africa - Middle East Within Far East Within North America Middle East - Far East South Pacific Within Europe Europe - Middle East Mid Atlantic Other routes North and Mid Pacific Total North Atlantic Within South America Far East - Southwest Pacific North America - Central America Europe - Far East South Atlantic Europe - Africa Within Africa North America - South America Africa - Far East International Passenger Growth by Route - % Growth 20% 10% 0% -10% -20% Africa - Middle East Within North America Within Far East Europe - Middle East Other routes North and Mid Pacific Far East - Southwest Pacific North America - Central America Middle East - Far East Total South Pacific Within South America Mid Atlantic Within Europe Europe - Far East North Atlantic South Atlantic Europe - Africa Within Africa North America - South America Africa - Far East IATA Economics Conctact: Julie Perovic perovicj@iata.org 21 st July 2015 Terms and Conditions for the use of this IATA Economics Report and its contents can be found here: By using this IATA Economics Report and its contents in any manner, you agree that the IATA Economics Report Terms and Conditions apply to you and agree to abide by them. If you do not accept these Terms and Conditions, do not use this report. FURTHER ANALYSIS AND DATA Access data related to this briefing through the Monthly Statistics publication: NEW RELEASE ALERTS To receive notification of new analysis from IATA Economics, select Economic Briefings from: 5