Regional airlines achieve 8.9% growth

Even though the Arab Spring dealt a financial blow to Middle Eastern carriers, passenger traffic for the region's airlines increased 8.9 per cent in 2011 over the previous year against a 9.7 per cent increase in capacity, according to the latest industry figures. The International Air Transport Association said yesterday that international travel rose 6.9 per cent in 2011. Global full-year passenger demand grew 5.9 per cent last year against a capacity increase of 6.3 per cent, according to the global aviation body's full year traffic results. IATA said the increase was "in line with long-term growth trends". Load factors for Middle Eastern carriers dropped to 75 per cent in the year, making it the lowest in the industry after Africa, which achieved 67.2 per cent. Article continues below Globally, airlines saw load factors easing to 78.1 per cent from 78.3 per cent in 2010. The Middle Eastern carriers' growth is likely to continue this year as well, according to IATA Chief Economist Brian Pearce. "With the strong geographical advantage of the Gulf, competitive pricing, and expanding numbers of routes, we expect traffic to continue to grow in the region throughout 2012 by around 8.5 per cent," he told Gulf News. Long-haul markets Pearce said: "We've seen the strong growth in the Middle East continue, up almost nine per cent in 2011, though this represents a perhaps inevitable moderation in growth from the double-digit increases of recent years." December, however, ended on a more positive note with traffic up 11.7 per cent — the highest globally — over December 2010, against an 11 per cent rise in capacity and a load factor of 77.1 per cent, according to IATA estimates. The industry body said that airlines in this region have slowed the pace at which they have expanded but price competitive products and geographically well-positioned hubs are enabling Middle East carriers to "continue to improve their share of long-haul markets". "The region's carriers have restrained growth in capacity in line with the slowdown in markets and managed to limit the decline in load factors," Pearce said. He was quick to warn that "profits could, nonetheless, come under pressure" as markets slow and fuel prices remain at relatively high levels. IATA expects profits from carriers in the region to be "just $0.3 billion in 2012", on an average EBIT margin of 1.6 per cent, "which is weak but better than the global average," Pearce said. Latin American carriers led global passenger traffic growth in 2011 with 10.2 per cent as capacity inched up by 9.2 per cent, and European carriers posted the second highest growth rates with demand rising 9.5 per cent while capacity climbed 10.2 per cent. North America was the region with the highest load factor of 80.7 per cent. "Given the weak conditions in Western economies the passenger market held up well in 2011. But overall 2011 was a year of contrasts," IATA Director General and chief executive Tony Tyler said in a statement, adding that healthy passenger growth, primarily in the first half of the year, was offset by a declining cargo market. Optimism in China contrasted with gloom in Europe, Tyler said. "Ironically, the weak euro supported business travel demand. But Europe's primarily tax and restrict approach to aviation policy left the continent's carriers with the weakest profitability among the industry's major regions," he said. Tyler said that while cautiously improving business confidence is good news, "2012 is still going to be a tough year". Cargo demand The Middle Eastern carriers topped the cargo demand growth in 2011 at 8.2 per cent, while the month of December saw the region's carriers experiencing the highest cargo demand growth in the world at 10.8 per cent, IATA stated. Globally, meanwhile, in contrast with passenger demand growth, cargo markets contracted by 0.7 per cent last year, but achieved demand growth in December of 0.2 per cent. "Growth in demand lagged capacity increases at 6.3 per cent [passenger] and 4.1 per cent [cargo] putting downward pressure on load factors," IATA said. Economic crisis looms It is "far too early" to start predicting a soft landing for 2012, according to the IATA chief, even though improving business confidence and encouraging news from the US economy are heartening developments. "The Eurozone crisis is far from over. Failure to achieve a durable solution will have dire consequences for economies around the world. And it would most certainly tip the airline industry into the red," warns Tyler. He added that airlines have made massive investments in new fuel-efficient, environmentally friendly aircraft and that the "challenge is to deploy them profitably" into a dynamic and uncertain market. Urging governments to take a strategic view of the airline industry that recognises its value as a catalyst for economic growth, Tyler said that infrastructure investments to enable aircraft to land and tak eoff with a minimum of delay and fly the most fuel and carbon efficient trajectories will return a "far greater payout" to global GDP than "shortsighted and narrowly-focused tax grabs. Let's hope that 2012 will be the year when politicians put the required political capital behind important projects such as the Single European Sky and NextGen in the US," he said.