IATA reports Dec-08 premium traffic results

Business travel continued its steep decline in December, with passenger numbers travelling on premium tickets down to a level 13.3% lower than the previous year, following November’s 11.5% decline. This precipitous fall has been driven by the abrupt decline in business activity and international trade across the world.

 

Asia continues to show the greatest degree of weakness in premium travel, despite the epicentre of the current recession originating in the West, largely because of the importance of international trade and finance in driving business travel. Within the Far East premium travel was down 25.1% in December, fell 19.7% across the Pacific mand was down 17.3% on Europe-Far East routes. Only African markets show any signs of remaining growth.

Economy travel is on a slightly less precipitous trajectory of decline, with numbers travelling on these tickets during December down 5.3% which is slightly less than the 6% decline seen in November. Leisure trips at this time of the year may well have been pre-booked before the full extent of the recession was apparent, so an accelerated fall in economy travel numbers should be expected in January.


With jobs being lost at an increasing rate during January and consumer confidence falling further it seems that the bottom has not yet been reached for air travel and even weaker numbers may become evident in the first few months of this year.


The extent of the deepening recession is evident in the 13.3% decline in the number of passengers travelling on premium tickets during December. Having shown robust growth at the start of 2008, the dramatic decline in the last four months of the year meant that for 2008 as a whole premium travel fell 2.8%.

Economy travel is on a slightly less precipitous trajectory of decline, with numbers travelling on these tickets during December down 5.3% which is slightly less than the 6% decline seen in November. Leisure trips at this time of the year may well have been pre-booked before the full extent of the recession was apparent, so a renewed slump in economy travel numbers should be expected in January. The decline in the last four months of 2008 was not sufficient to offset the robust growth experienced earlier in the year. As a result the figures for 2008 as a whole show 0.9% growth in economy travel.

Since those travelling on full or discounted economy tickets represents over 90% of passenger numbers the 0.9% growth in economy travel in 2008 more than offset the 2.8% fall in premium travel. Overall passenger numbers on international markets, flown by IATA airlines, grew by 0.5% in 2008..

This 0.5% growth in passenger numbers was less than the 1.6% growth in international RPKs reported earlier, the reason being that the (earlier) faster growth of longer-haul markets particularly in emerging regions like Asia where travel distances are longer is increasing average flight distances. The December data shows this trend is continuing for the moment with the 6.1% fall in December passenger numbers exceeding the 4.6% fall in RPKs

The extreme weakness of demand combined with an inability to shrink capacity to match is now causing fares and yields to decline. Even the less price sensitive premium segment of the market is facing excess capacity to the extent that average premium yields began to fall in November. By November average yields (excluding fuel surcharges) were around 6% down on levels the previous year. As a result IATA estimates that premium revenues in December had fallen to some 20% below year earlier levels. In normal years premium passengers make up around 8% of passenger numbers but 15-20% of revenues.



(c) Centre for Asia Pacific Aviation. Date posted: 19-Feb-09