Economy class traffic drives rise in volumes by 4.8%

Although passenger travel on international markets rose 4.6 percent  in February compared to a year ago, economy class travel drove the rise in volumes in February, up 4.8 percent year-on-year and helped by falling fares.

But the acceleration in the year-on-year comparison is also partly a result of the Lunar New Year occurring one month later in 2015 (in February).

The Lunar New Year, according to the International Air Transport Association (IATA), tends to give a boost to holiday-related leisure travel, adding that on the other hand, the growth trend in premium international passenger travel has flattened over the past several months.

Premium international air travel volumes, in IATA most recent data, shows that volumes have not increased since August 2014.

“There was a weak 2.3 percent rise in premium travel in February year-on-year; this development reflects a lagged response to the gradual slowdown in improvements in business confidence throughout mid 2014, with economic conditions in some emerging markets deteriorating; the within Europe travel market was particularly weak in January, up just 0.4 percent for premium class, and 1.6 percent for economy – notably slower than the trend in 2014, which averaged close to 4 percent overall.

By contrast, longer-haul markets continue to perform relatively more strongly, including the Middle East to the Far East/Europe and North and Mid Pacific, which explains why international RPKs expanded at a much faster pace than passenger numbers.

“Latest data show there are signs of a pick-up in business confidence in the Eurozone and United States which could help ease some of the downward pressure on business-related international air travel in coming months. Looking at international air passenger volumes, data reveal a flattening in the growth trend, particularly for premium passenger numbers.

“There were signs of stronger growth in Q3 2014, after a period of notable weakness mid-year, but that positive momentum has slowed again. Premium international air travel volumes have not increased since August 2014. This weakness is consistent with a lagged response to the waning business confidence throughout H2 2014.

“That said, data reported throughout Q1 by JPMorgan/Market show there are signs of a pick-up in business confidence in the Eurozone and US, which could help ease some of the downward pressure on business-related international air travel in coming months,” Tony Tyler, IATA director general, said.

He explained that there was notable difference in performance of premium and economy seat classes in February, with growth of 2.3 percent and 4.8 percent respectively.

“In 2013 and during earlier parts of 2014, 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 yields growth and revenues.

“During the last couple of months, however, weakness in business-related premium travel has placed 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 further 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,” he added.

According to him,  the profile of air travel growth, with a strong second half in 2013 and relatively slower growth during the earlier months of 2014, has been driven by wider economic developments. World trade and industrial production accelerated during the second half of 2013, but that trend failed to continue in 2014, with growth slowing for both measures in Q1.

He explained that during the course of the second half of the year, however, there was another pick-up in world trade activity, mainly in emerging Asia.

“But that positive development was negated by gradual slowdown in business confidence throughout much of H2 2014, which has restricted growth in international air travel. The lagged impact of that weakness in business confidence in late 2014 continues to show-up in  premium travel performance in 2015.

Latest data (March) show there are signs of a pick-up in business confidence in advanced economies – namely the Eurozone and US – which could help ease some of the downward pressure on business-related international air travel.

Sade Williams