Last year was the year when traffic finally returned, and although there will be no soft comparisons for 2005 figures, most commentators see sustained growths ahead
The world's airline industry saw traffic rebound in 2004, albeit against pretty weak comparative figures for 2003. Preliminary figures from ICAO suggest a traffic rise of 14% for domestic and international services, while IATA suggests an increase of 15.3%.
In 2003, a combination of SARS, the Iraq war, the threat of terrorism and a relatively weak world economy, meant that passenger numbers were, to say the least, subdued. "Last year's double-digit growth was essentially a combination of ‘real' growth plus the effect of the low base level in 2003," says DVB Bank, the transport finance expert.
In the wake of last year's traffic surge, ICAO predicts more subdued growth for 2005 and 2006, at just over 5% in each year. IATA forecasts 6% annual passenger and cargo traffic growth for the 2005-2008 time period.
An idea of the stagnation that has afflicted the industry this decade is demonstrated by the fact that the IATA 2004 percentage increase is around the same when compared with 2003 or 2000 at around 15%.
On a positive note, capacity growth has been pretty conservative, increasing at about 12% in the year according to IATA. Compared with 2000, world capacity is just 8.8% higher – with Europe seeing no capacity growth and North America dropping 0.9%. Against this background, load factors have risen. US majors added 2.1 percentage points, while the figure for Europe was 1.2.
Low-cost substitution
However, the conservative attitude to capacity by mainline carriers is far from universal. In the USA, low-cost operator JetBlue Airways grew by over a third, while regional carriers Mesa Air Group, Pinnacle Airlines and US Airways Express all grew by over 60%. In Europe, Ryanair and easyJet have both been adding capacity aggressively.
Although not the largest of the world's airline regions, the growth of the Middle East stands out from its peers. The region's traffic saw a 25% hike last year and has grown by 50% since 2000, outstripping capacity growth of 44%.
Consultants air4casts sees Asia-Pacific as again being the strongest of the three main geographical regions in 2005. The firm says that the region will benefit from "the spin-off effects from hyper-normal growth in China and that should be supported by the currency peg to the dollar". The group sees Chinese traffic increasing by 15.5% in 2005. Even so, the Chinese market would still be less than a tenth of the size of the US, air4casts says, suggesting that there is still plenty of room for growth in the world's most populous country.
The Association of Asia-Pacific Airlines (AAPA) says international passenger numbers for 2004 reached a record 117 million, 21 million more than in a SARS-afflicted 2003 and 8 million up on 2002.
Robust intra-Asian traffic and long-haul markets were up 18.6% and 12.8%, respectively, with load factors at 73.3%. "Helped by strong global economic growth, 2004 was a remarkable year in terms of traffic recovery and new growth for AAPA member airlines," says Andrew Herdman, AAPA director general.
"The outlook for 2005 remains positive and we are looking at a prospect of further traffic growth of 6.7%," he adds. "Consistent with this growth, AAPA members will be taking delivery of a total of 73 aircraft in 2005, adding to the existing fleet of 1,273, mainly larger widebody aircraft."
DVB notes that the strongest routes in terms of growth last year all involved Asia, with intra-Asian traffic up 19.5%, Europe-Middle East climbing 18.9% and Europe-Asia-Pacific up 14.9%. This includes a SARS recovery effect.
Of the other two regions, Europe is expected to see 7.1% growth, with North America, the largest of the three, coming in at 5.4%. North American growth will be concentrated in the international arena, air4casts predicts, growing at around double the rate for domestic traffic. Transatlantic traffic is due to increase by 13.8%.
US concerns
The Geneva-based group also warns that December 2004 passenger numbers for the USA, while strong on a year-on-year basis, looked weaker in relation to November. "The increase was in the order of 2%, whereas traditionally a seasonal rise of 5-6% might be expected."
The Association of European Airlines (AEA) reported some signs of weakness on the transatlantic towards the end of the year and into early 2005 and warns that load factors on this market fell from around 90% in early January to around 70% by month end.
A figure of 5.7% growth for intra-European traffic growth was split between a relatively buoyant cross-border market showing 7.6% growth and a very weak domestic sector showing a 0.9% increase. "It is encouraging to note the airlines' prudent increases of capacity offered, leading to historically high seat load factors," says the AEA.
Even if the double-digit rates of 2004 will not be repeated in the near future, at least there seems to be a level of stability as regards traffic. Whether this is matched by capacity discipline remains to be seen, however.
REPORT BY COLIN BAKER AND ANALYSIS BY FABRICE TACOUN IN LONDON
Source: Airline Business
