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Economy traffic back on track, premium still lagging

21-Dec-2010

Volumes and revenue in the international premium travel market have still not returned to pre-recession levels, according to the latest Premium Travel Monitor released by IATA. Despite growth of 9.2% over the year, and a strong 10.9% increase in Oct-2010, premium passenger volumes are still 7% below that of Oct-2007 and still 11% below peak values on a seasonally adjusted basis.

Premium revenues in Oct-2010 were 17% higher than Oct-2009, while IATA believes premium fare levels in Oct-2010 were almost the same as Oct-2009. Premium revenues are almost 13% below the levels of Oct-2008 and 14% below the levels of Oct-2007.

The outlook for premium travel is improving

Business confidence data is consistent with further growth in business output and the corporate sector remains optimistic, both of which should fuel business travel. IATA’s 2011 industry financial forecasts now incorporate a small increase in passenger yields, reflecting the impact on mix of improving premium travel performance.

International passengers by seat class

The two-speed recovery and structural change

With the ‘two-speed’ recovery under way, there is a wide differential between the recovery of premium travel in developed and developing markets. Markets linking Asia in particular have been strong, due to the rapid economic recovery in the region. The intra-Far East market has recovered fully from the recession, with traffic up 18.3% year-on-year in Oct-2010.

The expansion of flows to/from the Middle East has also been a prominent feature of the market this year and the region continues to grow its share of global premium revenues and traffic. For the year to Oct-2010, all major traffic flows to/from the region have recorded double-digit growth.

IATA Middle East premium revenue share (%) vs premium traffic share (%): Feb-08 to Oct-2010

Premium international traffic within Europe was up 6.4% in Oct-2010 and has gained 2.8% this year, providing further evidence of the ongoing structural adjustment in the market. Traffic volumes are still 7% below the level seen in Oct-2007. In Oct-2007, intra-European premium traffic accounted for 28.5% of the total worldwide premium travel volume and some 10.8% of premium revenue; the corresponding figures now are 23.6% and 7.2%.

Premium traffic flows to/from Europe were up 12.3% year-on-year in Oct-2010. Passenger volumes are 9% above Oct-2008 levels and 4.8% better than Oct-2007.

Traffic in the important North Atlantic market is slowly coming back. Volumes were up 8.9% in Oct-2010, but have recovered just 4.6% for the year to date - or around half the pace of the overall international growth rate.

IATA total premium traffic growth: Sep-08 to Oct -2010

Recovery to continue, Asia and Middle East

While growth rates are varying markedly across regions, there is a general trend of yield recovery and rising confidence. There is a close correlation between world trade and business travel, but both are still below 2007 levels and there is some way to go before a full recovery is achieved.


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