Worldwide international passenger traffic rose by 6% in May-08, which was “stronger than expected, given the economic downturn”, according to the International Air Transport Association (IATA). International load factors rose slightly for the first time in three months to 74.3% on slower capacity growth of 5.4% during the month.
The passenger demand and load factor results in May-08 are heartening for the industry, although the real test will come with Jun-08 traffic data, which may show some softness as airlines raised surcharges and fares in the month in response to surging fuel prices.
The World Tourism Organisation (UNWTO) reports (02-Jul-08) worldwide international tourism arrivals rose 5% during the first four months of the year, “in spite of uncertainties posed by the global economy”. All regions had positive results, with the fastest growth in the Middle East, Northeast and South Asia. The UNWTO stated prospects for international tourism “remain positive”, although demand is expected to grow at a slower pace over the remainder of the year.
IATA has meanwhile highlighted the weak freight market, which tends to be a bellwether for the underlying economy. May-08 showed a “significant drop” in cargo growth to 1.3%, taking the year-to-date increase down to 2.8% - well down on the 4.3% recorded for the full year of 2007.
The biggest cause of the slow cargo growth came from a 0.5% contraction in Asian carrier traffic. This resulted from the impact of the earthquake in China and weakness in the Japanese economy, while Asian carriers also saw weakness in trans-Pacific markets with increased competition from US carriers taking advantage of the weak US dollar, according to IATA.
Asia Pacific cargo traffic (FTK) vs global (Industry):
Jun-07 to May-08
Source: Centre for Asia Pacific Aviation & IATA
Cathay Pacific, one of Asia’s most efficient and best-managed airlines, has issued a profit warning – its first since SARS in 2003 – that first half and full-year earnings may “disappoint”. The airline’s shares slumped 7.8% on 02-Jul-08 to two-year lows.
Cathay has consistently warned this year that fuel prices were hurting its business, particularly its freight operation, but it has been growing capacity at more than double the rate of its main rivals.
Asia Pacific carrier capacity (ASK) growth:
Five months to 31-May-08
Source: Centre for Asia Pacific Aviation & Company reports
As the pressures mount, Cathay may have to lower its aggressive rate of expansion this year.