Flight demand, airline profit increases worldwide

Fuel costs and ticket price rises are having no impact on consumer demand for flights, IATA says.
Written by Charlie Osborne, Contributing Writer

Research has revealed that there is healthy demand for flights from consumers worldwide.

On Wednesday, the International Air Transport Association (IATA) released a new report (.pdf) which found that total revenue passenger kilometers (RPKs) rose on average 6.8 percent this year in comparison to August 2012. In addition, the solid performance of airlines to keep capacity rates strong over the year pushed the load factor to match the record high of 83.4 percent set in July 2011.

Tony Tyler, IATA's Director General and CEO said:

"August was a positive month for passenger travel. The solid performance was also supported by a stabilization of emerging market weakness and renewed confidence in Europe and North America. Trading conditions are still tough with high oil prices, stiff competition and regulatory hurdles. But demand growth remains a bright spot with most indications pointing towards an acceleration in the fourth quarter."

Passenger demand in international markets rose 7.5 percent year-on-year. Capacity rose 5.6 percent, and load factor climbed 1.5 percentage points to 84 percent. All regions recorded year-over-year increases in demand.

Some highlights of the research include:

  • Asia-Pacific carriers recorded an increase of 8.6 percent compared to August 2012, the strongest performance among the three biggest regions.
  • China shows an improvement in travel demand. With capacity up 6.3 percent over August 2012, load factor rose 1.7 percentage points to 81.6 percent.
  • European carriers' international traffic climbed 5.4 percent in August compared to the year-ago period, on a 3.7 percent rise in capacity, pushing load factor up 1.4 percentage points to 86.4 percent.
  • North American airlines saw demand rise 5.1 percent over a year ago, the slowest growth for any region but still close to double the year-to-date increase of 2.7 percent. Looking ahead, the U.S. Government shutdown is not expected to impact airline operations but could dampen demand. The 27-day shutdown in 1996, for example, resulted in delays for tens of thousands of passport and visa applications.
  • Middle East carriers had the strongest year-over-year traffic growth at 15.1 percent.
  • Latin American airlines posted a demand rise of 9.8 percent in August, year-over-year.

Tyler commented:

"Profits are weak, but moving in the right direction. In 2012 airlines made an average 1.1 percent net profit margin.

That is expected to double to 2.2 percent in 2014. Cost control, consolidation, joint ventures and product innovations are among the measures that are helping airlines achieve the efficiencies needed to secure their financial futures."


Image credit: Ryanair

This post was originally published on Smartplanet.com

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