International passenger traffic up by 3.2% in November, says IATA

International passenger traffic was up 3.2 per cent in November year-on-year, overall, signposting a slowdown on October, according the International Air Travel Association (IATA), the clearing house for global airlines.

Although, part of the weakness could be attributed to temporary factors, there are reasons for concern that a down trend is developing.

According to IATA, both economy and premium travel weakened, but there was a notable deceleration in first and business class travel.

Economy class travel was up 3.4 per cent year-on-year, while premium travel was only 0.7 per cent higher in November.

At the route-level, IATA stated that the weakness in air travel in November was mostly a result of the Europe-Far East market, stressing that the strikes at Lufthansa caused some downward impact on the year-on-year comparison.

But further slowdown in the Chinese economy could be eroding demand, particularly for business-related air travel, which raises concerns that a downtrend is emerging, growth on the within Europe travel market, which has supported expansion in passenger numbers during the recent past, was also slow in November.

The strikes, it said would also explain part of the weakness on the market. But given that this market also includes segment traffic on longer haul journeys, it also could be impacted by economic slowdown in other parts of the world.

The outlook for international passenger growth remains mixed because growth during the recent past has been narrowly based and supported by the Within Europe and North Atlantic markets. Weakness in other regions, like Asia, has become more of a concern with the November data showing signs of a downtrend developing.

In 2013 and early 2014, when premium travel was expanding at a faster pace than economy travel, there was a slight boost to the share of premium travel from total travel. This was positive for airline yield growth and revenues.

That trend did not continue into 2015, with relatively stronger growth in economy class travel placing downward pressure on the share of premium seats from the total. As noted in the previous section, 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 gain in premium’s share of total traffic, growth on longer-haul markets has been robust. This has helped to support premium yields on some markets. In turn, this 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 lagged impact of weakness in world trade and industrial production in late 2014 was apparent in the sluggish growth trend for premium travel at the start of 2015. Improvements in advanced economies, particularly in Europe, started to revive the trend in international air travel (both travel classes) toward the end of Q1 2015.

These positive developments according to IATA remain intact, but the deepening weakness in the Chinese economy is now raising concerns that the positive trend may be coming to a halt.

Ifeoma Okeke