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IATA forecasts 3.3 billion pax by 2014; shift eastward with 1 billion expected in Asia

Analysis

Global air travel is expected to increase to 3.3 billion passengers by 2014, up by a third from 2.5 billion passengers in 2009, according to IATA. Growth will be driven by strong economic activity in Asia which will act as a key driver to the industry's expansion.

The region is not only driving growth but also the "profits and the money" are now in this region. International aviation is expected to handle 38 million tonnes of air cargo by 2014, up 46% on 2009.

Announcing the forecast, IATA Director General and CEO Giovanni Bisignani said: "The focus of the industry continues to shift eastward. By 2014, one billion people will travel by air in Asia Pacific. That's 30% of the global total and a 4ppt increase from the 26% it represented in 2009. The same is true for cargo where Asia Pacific will account for 28% of global volumes.

"Despite some regional differences, the forecast indicates that the world will continue to become more mobile. This creates enormous opportunities but also presents some challenges. In five years, we need to be able to handle 800 million more passengers and 12.5 million more tonnes of international cargo. To realise the economic growth potential that this will bring, we will need even more efficient air traffic management, airport facilities and security programmes. Industry and governments will be challenged to work together even more closely."

Asia overtook North America as the largest aviation market in 2009 and will account for 30% of air traffic by 2014, while North America will slip to 23% of the total.

China to be largest contributor of new passengers

China will be the largest contributor of new passengers, accounting for 214 million - 181 million domestic and 33 million international - or 27% of the 800 million increase in passengers between 2009 and 2014.

Some 360 million (45%) of the new passengers will travel on Asia Pacific routes as the UAE, Vietnam and Malaysia also witness considerable growth in international passengers. The US will remain the largest single-country market for domestic passengers (671 million) and international passengers (215 million).

Asia the most profitable region

In 2011, Asian carriers are expected to report a profit of around USD4.6 billion of the global profit of USD9.1 billion. This compares with USD3.2 billion from North American carriers, USD700 million from Latin America, USD400 million from Middle Eastern carriers and USD100 million for their European counterparts.

This clearly highlights the importance of Asia to the future of the industry. Much of this can be related to the economic development in the region with Mr Bisignini stating: "Look at one number, GDP. When you see Singapore ... and China have double-digit growth and in Europe we're struggling between 1 and 2%, that's how the industry is going."

IATA also noted that based on market captilisation, there is a similar shift eastward. The five largest airlines in the world by market capitalisation are Air China at USD20 billion, the combined LAN and TAM at USD15 billion, Singapore Airlines at USD14 billion, Cathay Pacific at USD12 billion and China Southern at USD11 billion.

'Higher oil prices could spoil party'

IATA expects GDP in the Asia Pacific region to grow 6.6% in 2010 while European GDP is expected to increase by 1% with GDP growth of 1.5% in the US. Mr Bisignani reiterated that the global airline industry would likely earn USD9.1 billion in 2011, down from USD15.1 billion in 2010, coinciding with increased fuel prices.

IATA noted that fuel expenses account for 27% of an airline's costs and the industry will likely spend USD156 billion on fuel in 2011, up from USD139 billion last year. IATA expects Brent crude to average USD84/barrel this year with every USD1 above this to increase the industry's costs by USD1.6 billion.

Global situation remains very challenging

Mr Bisignani, at IATA's Vision 2050 press briefing, noted that the global situation for aviation remains "very challenging".

The aviation industry creates almost USD600 billion in revenues and has USD205 billion in debt, with margins over the past 40 years averaging a "pathetic" 0.1%. Mr Bisignani stated that "this is the margin for a charity association, not a business. Continuing in this way is not sustainable. We would need 7-8% just to meet the cost of capital". The industry supports 32 million jobs and is a USD3.5 trillion economic activity.

IATA expects the "shadow of the global economic recession" to remain over parts of the industry for "some time to come" with sluggish growth rates in Europe and North America not only the result of being mature markets. Growth rates will also be dampened by lingering consumer debts, high unemployment and austerity measures.

APPENDIX: IATA forecasts for 2009 to 2014 period

Region

Passenger traffic

Freight traffic

Asia Pacific

International passenger demand is expected to grow 7.6%. By 2014, China, Japan and Hong Kong will be the biggest international passenger markets in the region, with China being the largest international and domestic market in Asia. Four of the top five fastest growing international markets are in Asia - China at 10.8%, the UAE at 10.2%, Vietnam at 10.2%, Malaysia at 10.1% and Sri Lanka at 9.5%.

The region will have the highest growth rate for international freight at 9.8% with Hong Kong, Japan, China, South Korea and Taiwan comprising the region's top five markets.

Middle East

Expected to have the fastest growth rate at 9.4%. The UAE, Kuwait, Jordan will be among the top 10 fastest growing countries, with the UAE ranked 7th for international passengers at 82.3 million.

International freight demand will grow 8.1% as freight links to, and via, the region continue to develop. UAE will lead, handling 2.7 million tonnes of cargo.

Africa

Expected to see international passenger growth of 7.7%, the second highest of the regions.

Expected to be 5.8%, the lowest among the regions.

Europe

Will record international passenger demand growth of 4.7%. The UK, Germany, Spain, France and Italy will remain among the top ten largest international passenger markets.

International freight demand for the region will grow 6.5%, with Germany, UK and the Netherlands leading the region in size. Russia will have the fastest growth rate of 11%.

Latin America

International passenger demand will grow 5.7%.

International freight demand will increase 6.4%, with Peru leading the region's freight growth at 9%.

North America

Will grow 4.9% for international passenger demand. The US will continue to be the largest domestic and international passenger market in the world.

Will grow 7.6% for international freight and is expected to remain the largest international freight market by some margin.

IATA 2014 passenger forecast

2014 forecast

Commentary

International passengers (bill)

1.3

The 313 million passenger increase from 2009 reflects a compound annual growth rate (CAGR) of 5.9%. The fastest growing markets for international passenger traffic will be China (10.8%), the UAE (10.2%), Vietnam (10.2%), Malaysia (10.1%) and Sri Lanka (9.5%).

Top 10 international markets (mill)

US (mill)

214.5

Marks an increase of 45 million passengers

UK (mill)

198.1

An increase of 33 million passengers

Germany (mill)

163

An increase of 29 million passengers

Spain (mill)

123.3

An increase of 21 million passengers

France (mill)

111

An increase of 21 million passengers

Italy (mill)

85

UAE (mill)

82.3

China (mill)

82.1

Japan (mill)

71.6

Hong Kong (mill)

62.2

Domestic passengers (bill)

2

To increase by 488 million passengers from 1.5 billion in 2009 reflecting a CAGR of 5.7%. China will record the highest CAGR of 13.9% and contribute an additional 181 million passengers. Other countries with double-digit growth include Vietnam (10.9%), South Africa (10.6%), India (10.5%), and the Philippines (10.2%).

Top five domestic markets

US (mill)

671

China (mill)

379

Japan (mill)

102

Brazil (mill)

90

India (mill)

69

International cargo volume (mill tonnes)

38.2

To grow at a CAGR of 8.2% over the forecast period. Excluding the impact of the rapid post-recession rebound in 2010, for the 2011-2014 period the consensus view for airfreight is that it will stabilise at 5% CAGR. This is slightly below the forecast growth in world trade (6%) suggesting a still conservative outlook after the recession shock and possibly some loss of market share to sea shipping. The top five fastest growing international freight markets over 2009-2014 will be Hong Kong (12.3%), China (11.7%), Vietnam (11.4%), Chinese Taipei (11.3%), Russia (11.0%)

Top five international freight markets (mill tonnes)

International cargo growth is dominated by Asia, with Hong Kong growing at 12.3%, China at 11.7%, Vietnam at 11.4%, Chinese Taipei at 11.3%, and Russia at 11.0%.

US (mill tonnes)

8.8

Hong Kong (mill tonnes)

5.4

The volume growth expected in China and Hong Kong will account for a third of global volume growth over the period to 2014

Germany (mill tonnes)

4.4

Japan (mill tonnes)

4.4

China (mill tonnes)

3.8

The volume growth expected in China and Hong Kong will account for a third of global growth over the period to 2014

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