25-Mar-2011 4:42 PM

Asia Pacific aviation outlook ‘clouded’ by oil prices; Japan crisis

Analysis

Asia Pacific airlines witnessed some "moderation" in passenger and air cargo demand growth in the first two months of 2011, according to the Association of Asia Pacific Airlines (AAPA). The industry body warned that despite a positive start to 2011, the outlook for the industry is "clouded" by a sharp increase in oil prices and the situation in Japan which has the potential to "undermine the global economic recovery".

Summary

Passenger and air cargo demand growth in Asia Pacific airlines has moderated in the first two months of 2011.
The outlook for the industry is uncertain due to a sharp increase in oil prices and the situation in Japan.
Passenger growth in February 2011 was the slowest since October 2009, with a 3.5% increase.
Capacity has been growing faster than traffic, leading to a decline in passenger load factors.
International air cargo demand declined by 4.2% in February 2011, the first contraction since October 2009.
Cargo load factors have been declining for the past three months, with a 4 percentage point decrease in February 2011.

This statement is a marked contrast to comments from AAPA just last month. When commenting on Jan-2011 traffic, AAPA noted the region's carriers were "projecting further growth in aviation markets this year, with the introduction of new services and frequencies in the coming months". AAPA, however, also foreshadowed fuel concerns at the time, noting that "sharply higher oil prices are already pushing up the cost of air travel and adding to uncertainties over the outlook for continued growth in the global economy."

Passenger growth moderates

AAPA's Asia Pacific members handled 14.7 million international passengers in Feb-2011 up 3.5%. This represents the slowest pace of growth since Oct-2009, when passenger numbers declined by 3.2%. Feb-2011 marks the third consecutive month of single-digit passenger growth. Monthly growth rates have moderated as the recovery phase ends, with both passenger and cargo traffic now surpassing pre-recession peaks.

AAPA passenger numbers growth and passenger load factor: Jan-2009 to Feb-2011

The Feb-2011 increase follows growth of 8.0% in Jan-2011 and builds on strong growth of 16.9% in Feb-2010, after which passenger numbers increased by double-digits in every month of 2010 with the exception of Dec-2010. In the first two months of the year, Asia Pacific airlines reported growth of 5.8% compared to the same period in 2010.

International scheduled services for Asia Pacific airlines for Jan-2011 and Feb-2011

Capacity growing faster than traffic; Load factors decline

International passenger traffic (RPKs) increased by 2.8% in Jan-2011 with capacity (ASKs) increasing at a faster pace, by 6.9%. This marks the third consecutive month when capacity exceeded traffic growth. Dec-2010 marked the first month since Aug-2008 that capacity grew at a faster pace than traffic.

AAPA RPK growth and ASK growth: Jan-2009 to Feb-2011

Load factors declined 3 ppts to 79.0% in Feb-2011.

AAPA PLF growth: Jan-2010 to Feb-2011

Freight traffic declines for first time since Oct-2009

AAPA members' international air cargo demand (FTKs) decreased by 4.2% in Feb-2011 marking the first month of contraction since Oct-2009 when cargo traffic declined by 2.4%. The decline in cargo demand follows a very sharp rebound in freight volumes in 2010.

AAPA FTK growth and FATK growth: Jan-2010 to Feb-2011

Cargo capacity increased 1.7% in the month, resulting in a 4 ppts decline in average international cargo load factor to 69.7%. Again, this marks the third consecutive month of declines. Freight load factors improved in every month of 2010 with the exception of Sep-2010.

AAPA FLF and FLF growth: Jan-2010 to Feb-2011

Asia Pacific aviation outlook ‘clouded’ by oil prices; Japan crisis

Passenger growth moderates

Capacity growing faster than traffic; Load factors decline

Freight traffic declines for first time since Oct-2009

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