International Air Transport Association (IATA) announced global traffic results for July showing slower growth in both air travel and freight, but with considerable variation by region and market. July passenger demand in aggregate was 3.4 per cent higher than the same month last year, compared to a 6.3-per-cent increase in June and average growth of 6.5 per cent over the first half of the year. This slowdown in travel growth is being driven largely by the recent fall in business confidence in many economies.

July freight demand was 3.2 per cent lower than it was in the same month last year. This is down from the 0.1 per cent year-on-year growth rate of June. A large part of that decline was due to a comparison with a relatively strong July last year, but overall the trend in air freight is weak, in line with subdued world trade growth.

Airlines have responded to this slower growth environment by reducing added capacity levels, a move that has stabilized load factors at relatively high levels and provided some support for profitability in the face of high fuel prices. In July, passenger capacity rose 3.6 per cent, in line with the expansion of traffic, keeping the load factor at a relatively high 83.1 per cent.

“The uncertain economic outlook is having a negative impact on demand for air transport,” said Tony Tyler, IATA’s Director General and CEO. “The cargo business is 3.2 per cent smaller than it was a year ago. And passenger markets – with the exception of Africa, China-domestic and the Middle East – saw demand fall from June to July. Overall passenger demand is still up 3.4 per cent on the previous July. But the growth trend is clearly slowing. This, along with rising fuel prices is likely to make it a tough second half of the year.”

Air Freight (Domestic and International)

Air freight demand contracted 3.2 per cent compared to July 2011, but was unchanged compared to June. Middle East carriers recorded a 16-per-cent increase in demand year-on-year but all other markets experienced declines and the small recovery seen since the end of 2011 has stagnated.

Asia-Pacific carriers saw a 7.6-per-cent decline in demand in July compared to the previous year, the steepest decline for any region, while capacity dipped just 4.3 per cent. Asia-Pacific carriers have experienced virtually no growth in freight traffic since the fourth quarter of 2011.

European airlines had a 3.6 per cent decline in traffic, with a 0.9-per-cent rise in capacity. Europe’s airlines have seen only a 1-per-cent rise in demand since the 2011 fourth quarter.

North American airlines had a 3.6-per-cent drop in demand, matching a similar reduction in capacity. Load factor was the lowest for any region at 32.3 per cent.

Middle Eastern carriers’ 16-per-cent rise in traffic came on an 11-per-cent boost in capacity, helping raise load factors 2 percentage points to 45.3 per cent.

Latin American airlines’ demand fell 5.6 per cent, while capacity climbed 13.9 per cent, resulting in a load factor of 35.2 per cent

African carriers’ results were not immediately available.

The Bottom Line

“The huge success of the London Olympics was also an important reminder of the vital role that international aviation plays in bringing the world together and facilitating global mega-events. Now all eyes are on Brazil, which will host the 2014 World Cup and the 2016 Olympics. And aviation will play a key role there as well,” said Tyler.

“It will take a team effort to ensure that Brazil’s aviation infrastructure is up for the challenge,” said Tyler. Brazilian aviation supports 940,000 jobs and 1.3 per cent of GDP, while the connectivity provided by aviation supports Brazil’s emergence as a rising BRICS economy. But, despite aviation’s economic importance to Brazil, the country ranks 93rd for the quality of its air transport infrastructure in the World Economic Forum’s Travel and Tourism Competitiveness Index.

Working in partnership with the Latin American and Caribbean Air Transport Association and other aviation organizations, IATA recently hosted the first Aviation Day in Brazil. “With a focus on global standards, industry and government looked at ways to cooperate to ensure that Brazilian aviation continues to be a key driver of growth, operating at ever higher levels of safety, security, efficiency and sustainability,” said Tyler. “What is true for Brazil is also true for the rest of the world. Aviation supports 56.6 million jobs and has a global economic impact of $2.2 trillion. Governments should treat this resource wisely, with tax regimes that do not kill growth, regulation that facilitates growth and world-class infrastructure that can efficiently accommodate growth.”