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Record 15.8% jump in Middle East air travel

The exceptional growth by Middle Eastern carriers surpasses the global passenger traffic growth of 5.3 per cent in September (measured in revenue passenger kilometres) over September 2013.

Dubai: With a record jump of 15.8 per cent in September compared to a year ago, Middle Eastern carriers once again posted the strongest increase in international air travel, the International Air Transport Association, or Iata, said on Tuesday.

Airlines in the Middle East region, among the fastest growing in the world, continued to benefit from the strength of regional economies as well as expansion in export orders that support international business activity and business-related premium travel, the global body of carriers said.

Capacity rose 14.9 per cent and load factor climbed 0.6 percentage points to 78 per cent, the global body said in a statement.

The exceptional growth by Middle Eastern carriers surpasses the global passenger traffic growth of 5.3 per cent in September (measured in revenue passenger kilometres) over September 2013.

The global growth is on track to meet the Iata’s projections of $18 billion net profit on revenues of $746 billion for a 2.4 per cent net profit margin in 2014. “This continues the positive growth trend for passenger demand even though the performance was slightly below the August year-over-year rise of 6.3 per cent. September capacity rose 5.1 per cent and load factor rose 0.2 percentage points to 80.3 per cent,” the Iata said.

“Overall, demand for passenger travel is growing in line with expectations. We saw, however, some shifting of the sources of that growth in September, largely driven by economic factors. The strengthening of the US and Asian economies was offset by weakness in Europe and Latin America,” said Tony Tyler, the Iata’s director-general and chief executive officer.

“The three big stories in September were Europe, Russia and India,” said Tyler.

“It’s an interesting time for the global air transport industry, highlighting the complex vulnerabilities of the business. The fall in the price of oil is a good example. It is good news for an industry that spends a third of its operating budget on fuel. The full impact of the price drop will only be realised over time because of a time lag built into jet fuel pricing. And it could even be an indicator of difficulties ahead if the fall is driven by declining demand for oil rather than rising supply capacity,” said Tyler.

The Iata chief observed that there are, however, a lot of risks out there — growing weakness in key economies such as Europe and Brazil, the potential threat of Ebola to public confidence in flying, and the impact of political instability in various parts of the world. “The positive economic developments in Asia and the US continue to underpin profitability. But it is a delicate balancing act,” said Tyler.

The Iata anticipates that airlines will deliver an $18 billion net profit on revenues of $746 billion for a 2.4 per cent net profit margin in 2014. The Iata will update this estimate and take a first look at 2015 profitability on December 10 at its Global Media Day in Geneva.

European airlines reported 3.9 per cent growth for international demand. That’s a significant drop from the seven per cent reported in August indicating the impact of the Air France crew strike and a general weakening of European economic prospects.

Indian domestic travel spiked with a 26.3 per cent growth in September (several times the 7.6 per cent growth recorded in August) as a result of price stimulation.

September international passenger demand rose by 5.3 per cent compared to the same month in 2013. This was exceeded by a capacity expansion of 5.7 per cent which resulted in a softening of the load factor to 80.5 per cent, down 0.2 percentage points from the year-ago period.

North American airlines saw international demand rise by just 2.1 per cent. Asia-Pacific airlines reported September demand growth of 4.8 per cent compared to a year-ago. European carriers recorded growth of 3.9 per cent in September compared to a year ago, a significant slowdown on the August rise of seven per cent. Along with the impact of the 14-day Air France crew strike, this also reflects a lapse in the Eurozone economic recovery.

“Indicators show a weakening in key economies including Germany, owing to the Russia-Ukraine crisis and related sanctions, as well as a reversal in prior improvements in consumer confidence,” the Iata said.

issacjohn@khaleejtimes.com