Air Carriers Face Slowdown

Passenger travel actually posted a 3.4% year-over-year gain in July, but that gain was much lower than the 6.3% increase in June and the 6.5% increase in the first six months of 2012. July freight demand fell 3.2% year-over-year, down just 0.1% from the June decline.

The International Air Transport Association (IATA) reported July's global traffic data this morning, and the group's director general had this to say:

The uncertain economic outlook is having a negative impact on demand for air transport. … [T]he growth trend is clearly slowing. This, along with rising fuel prices is likely to make it a tough second half of the year.

To cope with declining demand, carriers reducing routes and flights in an effort to fill more capacity on existing flights. That means fewer planes in the air and lower fuel consumption.

In Europe, international traffic was up 4.8%, while in North America traffic was down 2.1%. Asia-Pacific growth stalled, up just 0.9% compared with 5.8% growth in July 2011. Carriers in the Middle East posted the largest gain, up 11.2%.

Domestic traffic rose most sharply in China, with a 9% increase, followed by Brazil with rise of 8.5%. U.S. domestic traffic fell 0.4% in July but airlines added 0.2% to their capacity.

The demand for air freight fell 3.2% in July, with Asia-Pacific carriers leading the fall with a drop of 7.6% and both European and North American demand fell by 3.6%.

As a measure of global economic health, air traffic data is a trailing indicator. But the drop in air freight traffic, following a similar drop in June, does not indicate an economy that is getting healthier.

Paul Ausick

Filed under: 24/7 Wall St. Wire, Airlines, International Markets, Research