Travel Monitor
Budget carriers shine in gloomy aviation year
- By: IMTIAZ MUQBIL
- Published: 29/12/2008 at 12:00 AM
- Newspaper section: Business
Scheduled airline passenger traffic in 2008 attained "small overall growth" in 2008 largely thanks to a significant increase in the performance of low-cost carriers, according to the International Civil Aviation Organisation.
The UN-affiliated aviation regulatory agency reported that although passengers carried on scheduled air services worldwide increased by 0.8% in 2008 to 2.29 billion, "this average growth was shared unequally between airline members of the International Air Transport Association and other types of carriers, notably low-cost carriers (LCCs)."
The non-IATA market share increased significantly, reaching 33% of domestic scheduled traffic and around 20% of total scheduled traffic, the ICAO said. It did not provide a detailed breakdown of the actual percentage increases.
However, a similar trend toward LCCs is apparent in Thailand, too. The Airports of Thailand annual report showed that passenger movements on LCCs from both Suvarnabhumi and Don Mueang airports rose from 7.57 million in fiscal year 2007 to 8.08 million in fiscal 2008 ending Sept 30.
Total LCC passenger traffic at all the international airports in Thailand has risen from 7.1 million in fiscal 2005 to 12.8 million in 2008, according to AoT, a far higher growth rate than passenger movements on regular scheduled airlines.
The ICAO report says that worldwide, international passenger traffic growth slowed this year, from 7.6% in 2007 to 4.1% in 2008. "The European region, which accounts for nearly 41% of international traffic, grew by 5.2% thanks mainly to the performance of its low-cost carriers."
The Middle East, with 8% of international traffic, grew by 8.9%, while Latin America and Africa, which together represent around 7% of international traffic, grew by 7.2% and 2.1% respectively.
The Asia Pacific region, which accounts for 27% of international traffic, had near-zero growth while the North American region, representing 17% of international traffic, registered substantial growth of 5.3%.
Traffic slowdowns were most pronounced on domestic routes, with a decline of 1.6% in 2008 compared to growth of 6.2% in 2007.
"The major dampener was the North American market - with nearly 58% of domestic traffic, it posted a 3.1% decrease. The Asia Pacific market, with nearly 27% of domestic traffic, grew by only 0.1%, while the European sector, with around 8% of total domestic traffic, decreased by 1.1% in 2008."
It said seat capacity in 2008 grew 3%, compared to 5.8% in 2007. "This was nevertheless higher than the overall traffic increase of 1.8%, which resulted in a decline in average passenger load factor on total (domestic and international) and international services, from 76.7% in 2007 to around 75.7% in 2008."
Said the ICAO report, "Analysis of passenger traffic results confirm the adverse impact of a slowing economy and lower gross domestic product (GDP) growth on airline traffic around the world.
"Real GDP at Purchasing Power Parity (PPP) growth significantly downgraded from 5% in 2007 to an estimated 3.6% for 2008, impacting traffic across all regions, with international traffic hit harder than domestic.
"In the first half of 2008, air travel demand was affected by higher fuel and commodity prices, leading to increased air fares and a decline in consumer discretionary spending on such items as leisure travel.
"The trend was amplified by the fallout from the global financial crisis in the second half of the year, hitting severely the performance of the Western developed countries as well as emerging economies in Asia Pacific. The slowdown was also experienced in the Middle East, which nevertheless benefited from the boom in oil prices for most of 2008."
In 2009, passenger traffic, expressed in year-on-year percentage change in PKPs, is expected to decelerate markedly to 0.9%. Average passenger load factors are expected to drop from 76.6% in 2007 to around 76% in 2008 and 2009.
"The return to high rates of traffic growth will be influenced heavily by how quickly the world emerges from the financial crisis and the ultimate impact of the crisis on economic rates of growth. Overall, the outlook is poor for the North American region, while it is more robust for the Middle Eastern, African and Latin American regions."
On the financial side, the ICAO said airlines of its member states were expected to register an operating loss of about $2.7 billion for 2008, before regaining operating profitability in 2009 and 2010, with estimated operating profits of $3.8 and $6.7 billion, respectively.
"The expected operating loss for 2008 would come despite measures, such as fuel surcharges and capacity adjustments, to counterbalance billions of dollars of additional operating expenses due to the dramatic increase in fuel prices.
"The recent decline in the price of oil to under $50 per barrel has given the hard-pressed airline industry some relief, while the aerospace manufacturing sector appears to be more resilient, even if the current recession would dramatically undercut the profit outlook for all the civil aviation stakeholders."
Imtiaz Muqbil is executive editor of Travel Impact Newswire, an e-mailed feature and analysis service focusing on the Asia-Pacific travel industry.
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