While the traffic figures for 2003 were nothing to write home about, there were clear signs towards the end of the year of better times ahead, and the recovery from the SARS crisis shows the industry can bounce back from sudden shocks.
The full year traffic figures for the world's leading airlines demonstrate the contrasting fortunes of the world's three main markets - North America, Europe and Asia-Pacific.
The latter has seen the most dramatic drop, with traffic down by 10% mainly due to the SARS epidemic. However, traffic figures from the region since October show that there has been a substantial and rapid bounce back, suggesting that underlying industry fundamentals remain strong. The fourth quarter, for instance, saw annual growth of just under 3% in terms of traffic, with capacity up nearly 1%.
Asia takes a hit
The worst hit carriers in the region were the two largest - Singapore International Airlines (SIA), with a 14% drop in traffic, and Cathay Pacific, with a 12.8% drop. The sudden nature of the SARS crisis meant that capacity levels did not match the drop off in capacity in most cases, although SIA managed to take a hefty 11% out of the market, far greater than Cathay's 6%.
Figures from Washington-based Air Transport Association show that US majors have yet to get back to pre-11 September 2001 traffic levels, and while the traffic drop of over 10% on the transpacific can partly be explained by SARS, there are signs that North American carriers are losing out to their European counterparts on the transatlantic.
US majors saw both traffic and capacity declines of over 6% on this market, while European mainline carriers saw both traffic and capacity rise by over 4% on North Atlantic routes.
The US majors are still struggling, with US Airways and United Airlines both taking over 8% of capacity out of the market as they tried to wrestle themselves out of Chapter 11 bankruptcy protection. Both saw traffic fall around 5%, and Northwest Airlines wasn't far behind.
The US majors managed to take out slightly more capacity than they lost in traffic, allowing load factors to pick up. Alaska Airlines and America West bucked the trend, adding over 10% to traffic in Alaska's case.
On the domestic front, US majors only managed to grow traffic by less than 1%. Domestic capacity also saw a decline, falling 2.7%. During in this period, low-cost carriers such as Southwest Airlines and JetBlue Airways have eaten away at the traffic base of the incumbent airlines.
The good news is that there were tentative signs of improvement towards the end of the year. December traffic was up 1% against a background of static capacity, considerably better than the full year figures, which included the Iraq war and SARS in the first half of 2003. The full year result was a 1% decline in traffic and a 3.4% fall in overall capacity.
US domestic yields saw an annual decline of 0.8%, better than a 3.4% decline in 2002 but still heading in the wrong direction. North Atlantic yields picked up 2.2%, however.
Europe saw a modest 1.2% rise in traffic, but again things looked much better towards the end of the year, with traffic increases in the 5% range. For the time being at least, capacity seems to be more-or-less in check, with rises in the 1%-2% range towards the end of the year, and an annual increase of 1.4%.
Atlantic additions
It is the North Atlantic that has been the main source of extra capacity for Europe's carriers, with intra-European capacity up a more modest 1.4%, matching increased traffic levels. Again, the low-cost sector, not represented in the Association of European Airlines (AEA) figures, has been a major growth area.
Of the European mainline carriers, the worst performance came from Olympic Airlines, which is in the middle of a desperate restructuring bid, with a 15% drop in traffic against a 10% fall in capacity. Most of the major European carriers saw traffic increases in the low single digits, the major exception being KLM, which has been one of the most conservative in terms of restoring capacity, taking out 3% in 2003.
Of the three largest players, British Airways kept its capacity more or less steady, while Lufthansa and Air France added 2.4% and 1.6% during the year, respectively.
In all three regions, there was relatively good news on load factors, which were up 1.8 points in the USA, 2.3 points in Europe and although they were down 5 full points in Asia-Pacific, again this was due to the disastrous first half, with a 1.5 point rise seen in the fourth quarter.
Source: Airline Business
