July - IATA

PREMIUM TRAFFIC MONITOR
JULY 2013
KEY POINTS
 Growth in premium air travel during July continued recent sluggish expansion, but there were more positive signs of
faster growth in business travel in the months ahead. International premium passenger numbers in July were up at
a similar rate to the growth seen so far this year, after accounting for the impact of holidays.
 The number of passengers traveling in premium seats on international markets was 1.4% higher in July compared
to a year ago, down on June growth of 4.1%. The slower year-on-year growth in July is a result of the timing of
Ramadan, which took place mostly in July this year, a month earlier than in 2012. The timing of Ramadan affected
growth rates for premium air travel on several routes, including Europe – Middle East (-4.8%) and Middle East –
Far East (-11.3%), which are otherwise seeing solid growth so far this year. We estimate that in the absence of this
seasonal impact, growth in premium travel in July would be close to performance seen so far this year (3-4%).
 But this growth rate is still slower than performance of premium travel markets in 2012 (~5%). The slower growth in
premium international passenger numbers so far this year compared to 2012 can be explained by developments in
the business environment. Global business confidence had been flat for the majority of 2013 and world trade
growth has slowed; growth in premium travel has weakened accordingly. There has been, however, modest
improvement in business sentiment in Q3, which should support business travel growth in the months ahead.
 In fact, there are some early signs of this improvement, which is being driven by advanced economies. With the
Eurozone recording growth in Q2 for the first time in 18 months and positive growth indicators coming from the US,
business travel across the North Atlantic saw some improvement in July. Although growth was still slow at 2.3% in
July year-on-year, it is well above the 0.5% expansion seen so far this year.
 Within Far East premium travel was up 5.5% in July compared to a year ago. While this is a slowdown on June
growth (9.0%), it is still a solid contribution to global international premium travel and in line with growth year-todate (6.1%). Taking a longer-term view, however, it is clear that the slowdown in China’s economy and Asian trade
are showing up in weaker premium travel growth in 2013 compared to 2012, when the market expanded 9.0%.
 The outlook for the global economy is cautiously optimistic. Business confidence is increasing at the fastest pace
since mid-2011, led by improvements in Europe and the US. There has also been a rebound in export orders,
which is a positive sign for world trade growth in months ahead. If this positive momentum is maintained, air travel
demand will continue to grow and could see some acceleration late in the year.
Premium passengers as a % of total
International air passengers by seat class
10.0%
(seasonally adjusted)
8.0
Source: IATA
(seasonally adjusted)
85
9.5%
Premium Pax, Million
75
7.0
70
6.5
65
6.0
Premium
60
Economy Pax, Million
80
7.5
9.0%
8.5%
8.0%
Economy
5.5
5.0
55
50
7.5%
7.0%
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Premium Traffic Monitor
 Premium travel markets are driven largely by demand for business travel.
July 2013
World trade is a good proxy for business travel not only because of the link to
manufacturing activity, but also because it is associated with international industries like banking and
consultancy. The first chart below shows the close movement in premium travel growth and world trade
growth. Over the last year, however, world trade growth has been expanding more slowly than premium travel
growth. The weakness in developed markets has caused the international trade of advanced economies to
decline overall. By contrast, international trade in emerging economies has been increasing at a stronger rate,
despite recent declines in emerging Asia trade volumes, which has helped sustain the growth we are seeing
in business-related premium travel. There have been, however, recent improvements in export orders and
business confidence because of better performance of advanced economies. This is an early positive sign for
world trade growth in the months ahead, as well as for business-related premium class travel.
 Business confidence is a good leading indicator of premium travel growth.
The second chart below shows business confidence (measured here by the
JP Morgan/Markit purchasing managers’ index). After remaining largely flat
throughout most of H1, business confidence has shown some improvement
in July and August, with current levels the highest they have been since mid2011. The improvement reflects better performance in advanced economies,
particularly in Europe and the US, and could indicate improved demand
conditions for premium travel demand toward the end of 2013.
Predict future demand
and minimize
investment risk.
Airline Industry
Forecast 2012-2016
now available
http://www.iata.org/public
ations/Pages/airlineindustry-forecast.aspx
 Financial market sentiment can also provide an indication of the state of the
global economy, and demand for business related travel. The third chart
below shows the MSCI World share price index and its movement relative to premium travel growth. The
share price index tends to lead changes in premium travel demand by 2-3 months, as fluctuations in
companies’ financial performance take time to affect business travel plans. Current financial market
performance, as indicated by the MSCI World share price index, suggests demand for business-related
premium air travel should receive support in the months ahead.
Premium Travel and Business Confidence
Premium passengers and world trade growth
Source: IATA, Markit/JP Morgan
Source: Netherlands CPB, IATA
20
15
15
10
% Change over Year
20
% change over year
10
5
0
-5
-10
-15
Premium Travel Growth
60
55
5
0
50
-5
45
-10
-15
40
-20
Premiux Pax
-25
-25
PMI Index (manufacturing)
-30
-30
-20
World Trade in Goods Growth
Source: IATA
40
20
20
10
0
0
-10
MSCI World Index
-20
Premium Traffic Growth
12
% Growth, Year-on-Year
30
Premium Pax, YoY % growth
MSCI World index, YoY % growth
Traffic Growth by Route - July 2013
60
-40
7
2
-3
First / Business
-60
35
30
Premium Traffic and Global Financial Market Performance
Source: IATA, Bloomberg
-20
Confidence Index
25
Economy
Total
-30
Within Europe
North Atlantic
Within Far East
Europe-Far East
North and Mid Pacific
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Premium Traffic Monitor
July 2013
TRAFFIC GROWTH BY MAJOR ROUTE
 Air travel markets in July expanded at rates similar to those seen so far this year, after accounting for
seasonal impacts. The number of passengers traveling in premium seats on international markets was 1.4%
higher in July compared to a year ago, down on June growth of 4.1%. The slower year-on-year growth in July
is a result of the timing of Ramadan, which took place mostly in July this year, a month earlier than in 2012.
We estimate that in the absence of this seasonal impact, growth in premium travel in July would be close to
performance seen so far this year (3-4%).
 The timing of Ramadan affected growth rates for premium air travel on several routes, including Africa – Far
East (-8.1%), Africa – Middle East (-12.7%), Europe – Middle East (-4.8%) and Middle East – Far East (11.3%), which are otherwise seeing solid growth so far this year. In August, growth rates for these routes
should rebound, and potentially show an upward bias, again due to the time of Ramadan this year compared
to 2012.
 On routes not impacted by the holiday, there appear to be early signs of the improvements in business
confidence outlined in the previous section, specifically on markets connected to advanced economies. With
the Eurozone economy recording growth in Q2 for the first time in 18 months and positive growth indicators
coming from the US, business travel across the North Atlantic saw some improvement in July. Although
growth was still slow at 2.3% in July year-on-year, it is well above the 0.5% expansion seen so far this year.
Moreover, indicators suggest continued economic acceleration in the US in Q3, with JP Morgan/Markit
measures of manufacturing and services activity in August rising to levels not seen since early 2011. If this
materializes, improvements in growth on this important market are likely to continue.
 However, there was still no improvement in premium travel within Europe, which was flat in July compared to
a year ago. Growth year-to-date is just 0.8%. There is significant variation in economic performance within the
region, and major economies like France are showing business and consumer confidence levels that raise
doubts over continued acceleration in growth in H2. Therefore, while the Eurozone stopped contracting in Q2
overall, the improvements are patchy and so far not significant enough to see a pick-up in premium travel on
short-haul flights within the region.
 Positive growth indicators from the US will likely contribute to further expansion on markets connected to the
region. In fact, growth momentum in the US economy combined with solid growth in South American
economies is supporting business and leisure travel on the North America – South America market. Premium
air travel was up 10.5% in July year-on-year, which is above the trend in growth so far this year (8.4%). In
addition, total air travel was up by 11.4% in July compared to a year ago, in line with growth year-to-date.
 Within Far East premium travel was up 5.5% in July compared to a year ago. While this is a slowdown on
June growth (9.0%), it is still a solid contribution to global international premium travel and in line with growth
year-to-date (6.1%). But regional weakness continues to place downward pressure on air travel demand.
China’s economy continued to decelerate in Q2 and the outlook for the second half of the year could easily
see more of the same. Moreover, emerging Asia trade declined in July to levels almost 5% below those at the
start of the year. These developments have resulted in a decline in premium travel growth in the region in
2013 compared to 2012, when the market expanded 9.0%. While progress in the Chinese economy in H2 will
play an important role for air travel demand in the region, other regional economies that are currently
indicating slower output – including India, Taiwan, South Korea, Indonesia and Vietnam – will also determine
the market’s growth trajectory for the remainder of 2013.
IATA Economics
th
19 September 2013
E-Mail: [email protected]
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Premium Traffic Monitor
July 2013
TRAFFIC GROWTH BY ROUTE
Premium Traffic Growth
Jul 13 vs.
Jul 12
YTD 2013 vs.
YTD 2012
Africa - Far East
-8.1%
Africa - Middle East
-12.7%
Europe - Africa
Economy Traffic Growth
Jul 13 vs.
Jul 12
YTD 2013 vs.
YTD 2012
8.1%
4.7%
9.2%
-6.2%
-10.1%
-1.8%
-7.8%
Europe - Far East
7.9%
3.3%
6.9%
Total Traffic Growth
Jul 13 vs.
Jul 12
YTD 2013 vs.
YTD 2012
9.5%
3.6%
9.3%
8.7%
-6.7%
8.7%
1.0%
-8.0%
0.7%
7.3%
5.9%
7.3%
5.6%
2.1%
10.9%
1.4%
10.4%
Europe - Middle East
-4.8%
Far East - Southwest Pacific
-1.0%
1.4%
2.6%
-0.5%
2.2%
-0.4%
Mid Atlantic
-7.4%
-2.6%
-6.6%
-2.5%
-6.7%
-2.5%
Middle East - Far East
-11.3%
3.1%
-0.9%
7.4%
-1.8%
7.0%
North America - Central America
5.9%
5.9%
0.7%
0.6%
1.2%
1.1%
North America - South America
10.5%
8.4%
11.5%
11.8%
11.4%
11.4%
North and Mid Pacific
0.4%
0.3%
3.2%
1.1%
2.8%
0.9%
North Atlantic
2.3%
0.5%
2.9%
1.3%
2.8%
1.2%
Other routes
4.1%
8.8%
-1.1%
10.1%
-0.7%
10.0%
South Atlantic
-0.7%
-1.0%
-0.1%
-0.1%
-0.2%
-0.2%
South Pacific
9.9%
6.2%
6.1%
5.2%
6.5%
5.4%
Within Africa
-2.1%
3.3%
5.6%
4.7%
4.9%
4.6%
Within Europe
0.0%
0.8%
2.4%
2.1%
2.3%
2.0%
Within Far East
5.5%
6.1%
3.2%
3.8%
3.4%
4.0%
Within North America
4.2%
1.6%
-1.2%
-0.2%
-0.8%
-0.1%
Within South America
7.0%
3.5%
7.4%
5.6%
7.4%
5.4%
Total
1.4%
3.0%
2.3%
3.5%
2.2%
3.5%
PREMIUM TRAFFIC GROWTH BY ROUTE
Share of Premium
Share of Total
Traffic
Revenues
Traffic
Revenue
Africa - Far East
0.3%
1.0%
7.4%
27%
Africa - Middle East
1.4%
1.1%
7.5%
24%
Europe - Africa
3.4%
5.0%
10.3%
37%
Europe - Far East
9.3%
15.0%
11.8%
38%
Europe - Middle East
4.6%
4.8%
9.7%
42%
Far East - Southwest Pacific
1.8%
3.5%
9.2%
27%
Mid Atlantic
1.0%
1.9%
8.7%
31%
Middle East - Far East
2.8%
2.1%
7.8%
17%
North America - Central America
6.7%
1.7%
9.5%
9%
North America - South America
3.3%
3.7%
11.7%
35%
North and Mid Pacific
6.1%
11.9%
13.9%
35%
North Atlantic
17.5%
21.7%
13.7%
51%
Other routes
3.8%
5.0%
8.2%
27%
South Atlantic
2.8%
3.4%
10.9%
36%
South Pacific
0.4%
2.6%
11.0%
46%
Within Africa
1.1%
0.8%
8.9%
21%
Within Europe
19.6%
4.8%
5.2%
11%
Within Far East
11.6%
9.0%
6.6%
16%
Within North America
0.8%
0.6%
7.1%
7%
Within South America
1.8%
0.4%
6.4%
11%
Total
100.0%
100.0%
8.3%
27.8%
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FURTHER ANALYSIS AND DATA
Access data related to this briefing
through the Route Tracker publication:
http://www.iata.org/publications/Pages/car
rier-tracker.aspx
Europe - Africa
Africa - Middle East
Mid Atlantic
Middle East - Far East
Within North America
Other routes
South Atlantic
North America - Central America
Europe - Middle East
Total
Far East - Southwest Pacific
Within Europe
Africa - Middle East
Middle East - Far East
Europe - Africa
Africa - Far East
Mid Atlantic
Europe - Middle East
Within Africa
Far East - Southwest Pacific
South Atlantic
Within Europe
North and Mid Pacific
Total
North Atlantic
Other routes
Within North America
Within Far East
North America - Central America
Within South America
Europe - Far East
South Pacific
North America - South America
% Growth
20%
North Atlantic
North and Mid Pacific
Within Far East
Africa - Far East
Within Africa
South Pacific
Europe - Far East
20%
Within South America
North America - South America
% Growth
Premium Traffic Monitor
July 2013
International Premium Traffic Growth by Route - July 2013
Source: IATA
10%
0%
-10%
-20%
International Passenger Growth by Route - July 2013
Source: IATA
10%
0%
-10%
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