Gateway Gazette

The Demand for Air Travel Remains Positive, Particularly in Emerging Markets

 

traffic_growth_americaDuring January to February, the international passenger demand rose 6.1%, with airlines in all regions except Africa recording growth. Lunar New Year celebrations, particularly in the Asia-Pacific region, certainly contributed to the robust February performance, but it is also clear that solid demand for connectivity is offsetting economic weakness in some regions including the Eurozone.

Carriers on the Asia Pacific carriers recorded an average increase of 7.6% throughout the period, as compared to last year, reaching 10.4 in February after a drop in demand a month before. Although such strong results reflect leisure traffic around the Lunar New Year, the underlying trend in volumes confirms robust expansion in air travel. However, developments on this important market will be worth watching, particularly as the Chinese economy has been showing signs of weakness.

European carriers’ international traffic climbed 4.9%, reflecting robust travel on low cost carriers as well as on airlines registered in Turkey, which is helping to overcome some of the impact on travel of the ongoing economic weakness in the region. By contrast, air travel in Russia fell significantly in February. The favourable base effects seen in previous months now appear to have dropped out of the year-on-year comparison, consistent with the economy being on the brink of recession.

air_traffic_americaNorth American airlines saw demand rise at an average of 3.1%, coinciding with a pick-up in consumer confidence and rising employment activity. Among developed economies, the US is certainly the standout performer. That said, the US air travel market is very mature, the prospects for strong growth in air travel demand remain limited.

Middle Eastern carriers had the strongest average traffic growth at 10.1%, although the monthly numbers have been on the decline since December. Nevertheless, the region’s airlines gain further market share, as its economies continue to show robust growth in non-oil sectors, and are therefore well-placed to withstand the plunge in oil revenues.

In turn, Latin American airlines’ traffic has been on the upward trend, rising at an average of 6.5%, since the regional trade volumes have improved in recent months. Nonetheless, growth in the Brazilian economy is stagnant and persistently-high inflation remains a concern. As a result, the upward trend for travel is not expected to accelerate notably in the near term.

Finally, African airlines experienced a continuous decline in demand, dropping at an average of 1.4% compared to 2014. The weakness in international air travel for regional carriers is not believed to be attributable to the Ebola outbreak. Rather, it appears to reflect negative economic developments in other parts of the continent including Nigeria, the continent’s largest economy, which is suffering from the collapse in oil prices.

All in all, it is noticeable that the industry is committed to sustainable growth, while the decline in oil prices over recent months should help support economic activity and passenger demand in 2015. In addition, recent improvement in business confidence, which had been easing throughout much of H2 2014, should help support growth in international travel. However, it is still critical that governments do their part in ensuring cost-efficient infrastructure to accommodate demand and not constraining growth with excessive taxation or onerous regulation.

Source AviaAM

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