European traffic holds up well despite threat of recession; analyst CAPA questions the gloomy prognosis for travel – 10/07/08
Published: 10/07/08
Source: ©The Moodie Report
By Dermot Davitt
EUROPE. Passenger traffic among Europe’s leading airlines held up well in May despite the threat of recession, though the Association of European Airlines (AEA) warns that preliminary June figures paint a darker picture. Yet, as we report below, the Centre for Asia Pacific Aviation is questioning whether the downturn in air travel will be as dramatic as the industry believes.
The AEA reported that European passenger traffic growth (measured in Revenue Passenger Kilometres) in May was +5.1%, and coupled with a capacity increase of +5.5%, this meant that load factors were just marginally down, by 0.2 points to 74.6%.
Intra-EU traffic regained its momentum with a +7.4% increase and improving load factors; and there were increases on routes to the Near and Middle East, Mid and South Atlantic, and Africa.
The high-volume markets across the North Atlantic and to/from Asia Pacific grew more slowly, at +3.3% and +2.8% respectively.
The AEA said: “The market situation remains difficult to read, as the May result turned out significantly stronger than expected, while preliminary June figures are substantially weaker. Figures derived from weekly reports point to a very sharp fall-off in the growth rate on intra-European services and traffic losses on North Atlantic and [Asia Pacific]. Overall, June may see little or no growth in traffic volume, but load factors appear set to record a substantial loss.”
The figures were picked up by respected aviation analyst the Centre for Asia Pacific Aviation (CAPA), which commented: “The world economy is supposedly on the brink of catastrophe…but consumers and travellers are spending like there is no tomorrow. Why? What has happened to that great forward economic trend indicator, airline demand? This highly discretionary item is the first to go when times start looking tough. So why hasn’t traffic slumped yet? Are the airlines crying wolf after all? The answers may yet be found in June and July’s results. But meanwhile, traffic data suggest a quite different scene.”
CAPA noted the comments of AEA about slowing demand in June, but remarked that each of Air France-KLM, British Airways and Lufthansa had posted solid preliminary traffic figures for intra-EU traffic in June.
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Preliminary June figures show European traffic holding up well, despite fears of a recession-led downturn
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CAPA said: “Perhaps it is the LCCs that are feeling the pain at this time to a greater extent than AEA’s network airlines. But their headline numbers do not bear that out. Ryanair and easyJet (including GB Air) also remained strong in June, despite large capacity increases. And there are no pervasive suggestions of yield softening, with load factors holding up.”
CAPA concluded: “For the time being, the warm feeling persists. But surely the weight of negative sentiment will soon tell. Then again, maybe not.”
About AEA
The Association of European Airlines (AEA) brings together 35 European established service and scheduled network carriers. These collectively carry 380 million passengers and 7 million tonnes of cargo each year, operating 2,660 aircraft serving 615 destinations in 165 countries with 11,865 flights a day. They provide around 426,000 jobs directly, and generate a total turnover of €79 billion.
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