Solid international passenger growth, although not as spectacular as in 2004, was good news for the airlines last year. But this was overshadowed by slow progress in the freight sector
The world’s international airline sector recorded solid growth in 2005. According to full-year results released by IATA, international passenger growth last year was 7.6%. While not growing quite as steeply as in 2004, this latest figure is above the historical 6% average, providing plenty of encouragement to the airlines.
However, this positive indicator is overshadowed by much slower growth in the freight market, which IATA states was due to weaker demand in critical sectors such as IT and semiconductors, and further losses. The industry made a $6 billion net loss in 2005, with profits at European and Asian airlines insufficient to overcome the huge losses suffered by US carriers.
“Growth and profitability are completely different concepts. Freight and passenger traffic are forecast to grow in the 5-6% range during 2006, but the industry is projected to record another loss of $4 billion for 2006,” says IATA director general Giovanni Bisignani. “The industry will not see black ink until at least 2007.”
Yet, the growth curve is providing a firmer foundation than before for an early end to airline losses. On a regional basis, Latin America and the Middle East led the upsurge with double-digit growth, with Africa and North America not far behind.
Although Latin American carriers are typically tardy in providing reliable financial figures to avoid bad news, Brazil’s low-cost phenomenon GOL has no such concerns. In just five years, GOL has become Brazil’s second-largest airline, having captured a 30% marketshare. It is credited with popularising air transport throughout the continent’s largest country, now serving 49 destinations in Brazil, Argentina, Bolivia, Uruguay and Paraguay. In 2005, it grew its revenue passenger-kilometres (RPKs) by a staggering 55.2%, and with capacity growing by less, was also able to improve its load factor. In sharp contrast, traffic at struggling Varig was down. While unable to match the surge of GOL, in Chile a revitalised LAN Airlines nevertheless recorded growth of 15.4%, also managing to boost its load factor. The LAN growth figures can be attributed to its expansion into other countries in Central and South America.
European carriers benefited from strong growth on routes to South America, sub-Saharan Africa and Asia Pacific, which made up for unimpressive domestic and North Atlantic increases, highlighting the disparity in performance across the networks. The average level of traffic growth of 6.3% for the year “masks market volatility”, says AEA secretary general Ulrich Schulte-Strathaus.
European growth
Of Europe’s major carriers, only Air France-KLM and Alitalia achieved above average growth, in Alitalia’s case the more remarkable, given its financial and operational difficulties in recent times. CSA Czech Airlines keeps marching ahead with 23.7% higher RPKs, although a still greater capacity hike had a negative effect on load factor.
A more than doubling in capacity produced headline growth figures of 104.6% and 75.9% at smaller operators AirBaltic and Norwegian respectively. Air Malta, Cyprus Airways and Swiss, all embroiled in restructuring efforts, suffered falls in traffic.
Growth in Asia was driven by the Chinese and Indian markets, which outstripped by far the performances by other countries in the region. No figures are yet available from India, but traffic will have been augmented significantly through the proliferation of new low-fare airlines, which entered the market in droves during 2005.
In China, the three major airline groupings left others far behind. China Southern grew by 65.6%, followed by China Eastern with 31.9% and Air China with 12.5%. Cathay Pacific and Malaysia Airlines also advanced by more than 10%, but Thai Airways International fell back slightly.
Traffic in North America shows a marked contrast between notable growth in the low-fare and regional sectors, and either modest gains or substantial reductions among the large legacy carriers. US Airways, which operated for most of the year under bankruptcy protection, lost 11.6% of its traffic, while United managed to keep its decline to 0.6%. On an overall basis, traffic was boosted by a resurgence in air travel between North and South America as carriers took advantage of more liberal air accords. ■
GÜNTER ENDRES / LONDON
Source: Airline Business
