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IATA reports growth in premium travel slows Nov-2010; 12% below pre-recession peak

IATA Director General and CEO, Giovanni Bisignani
IATA Director General and CEO, Giovanni Bisignani

Premium traffic increased at a slower pace in Nov-2010 but the upward trend remains intact according to IATA in its Nov-2010 premium traffic monitor. The industry body, however, noted premium traffic remains well below its previous peak while economy traffic is moving to “new highs”.

Premium traffic in Nov-2010 was around 12% below the pre-recession peak of Feb-2008 with IATA noting that while this “looks like a structural loss for premium travel … it may have more to do with the lack of full recovery in business travel drivers such as world trade and equity markets, rather than a further shift into economy seats”.

International air passengers by seat class (seasonally adjusted): 2004 to 2010

Premium traffic up 9.6% in Nov-2010; economy passengers increase 7%

Premium passenger increased by 9.6% year-on-year in Nov-2010, compared with 11.0% in Oct-2010, while economy passenger numbers increased 7.0% in Nov-2010, compared with 7.6% in Oct-2010. While growth has slowed, the rate of premium traffic growth is above the 6.4% increase reported for Aug-2010.

Premium traffic slumped 24% during the recession while economy travel declined 10%, explaining why premium traffic has consistently experienced faster rates of increase than economy traffic. 

Premium revenues remain around 15% below Nov-2008 levels

IATA, meanwhile, estimates that revenue from premium traffic in Nov-2010 remains 15% below the levels of Nov-2008 and 19.1% below Nov-2007 levels.  Premium revenues in Nov-2010 were around 12-13% higher on a year-on-year basis, lower than has been the case in previous months. Like premium traffic, average fares remain well below the levels of Nov-2008 (-3.5%) and Nov-2007 (-12.6%).

Premium ticket volume and revenue growth: 2007 to 2010

Business travel a key driver for both seat classes

IATA stated business travel continues to be the key driver for both seat classes and recent improvements in business confidence are a positive lead indicator for air travel in the next few months. Consumer confidence has also now stabilised to levels comparable to those in early 2008. IATA added that further gains in both premium and economy travel should be evident in the coming months.

Premium passengers and world trade growth: 2006 to 2010

Economy Passengers, Business and Consumer Confidence: 2006 to 2010

Wide variations by region

There continues to be a wide range of experience across and within regions with the strongest annual increases reported by routes that are within or to/from Asia.

Traffic Growth by Route – Nov-2010

Meanwhile, the bankruptcy of Mexicana still has a major impact upon comparisons for Central America where premium traffic in Nov-2010 was reported to be some 63% lower than in Nov-2009.

International premium traffic growth by route: Nov-2010

Meanwhile, markets connected to the Middle East, such as Europe and the Far East, have seen premium traffic rise to above Nov-2007 levels, while other markets, such as Europe-Far East, within Far East and the North Atlantic, remain below Nov-2007 levels.

IATA premium analysis by region:  Nov-2010


Passenger growth

Europe-Far East

Premium traffic was 10.7% higher than in Nov-2009. This reflects a decline from the reported increase of 14.6% for Oct-2010. Traffic between Nov-2009 and Nov-2008 declined by some 6% and in Nov-2008 it was some 10% lower than Nov-2007 levels. This means traffic is still some 6% below Nov-2007’s levels.

Within Far East

Premium traffic increased 16% year-on-year. Growth between the corresponding months of 2009 and 2008 was 0.8% but premium traffic in Nov-2008 was some 19.1% below that in Nov-2007. This suggests that Nov-2010’s total is still some 5.4% below that for Nov-2007.

North Atlantic

On the North Atlantic where Nov-2010 premium traffic increased 9%, there were declines of 5.9% between Nov-2008 and 2009 and of around 9% between 2007 and 2008. This suggests a gap of almost 7% compared with Nov-2007.

Middle East-Europe

Premium traffic increased 11.6% in Nov-2010. Given that traffic in Nov-2009 was just 1% lower than in Nov-2008 after an increase in Nov-2008 traffic of 0.8% compared with Nov-2007, premium in traffic in Nov-2010 is around 11.4% above Nov-2007 levels.

Middle East-Far East

Premium traffic increased 17.6% year-on-year with the corresponding changes for the same month between 2009 and 2008 reported as an increase of 13.7% and between 2008 and 2007, a decline of 0.6%. This suggests that premium traffic on routes in this market segment is now some 33% above Nov-2007 levels. 

Outlook: Premium traffic making gradual recovery

Premium traffic, revenues and fares are yet to return to pre-crisis levels, with IATA noting that this is a function of a lack of full recovery in business travel macro-economic factors rather than a further shift in economy seats. The gradual recovery, meanwhile, is expected to continue in the coming months, as economic drivers continue.

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