ANALYSIS: Airlines carry heavy loads in 2012

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While the rate of passenger traffic growth in 2012 differed quite sharply depending on where in the world or the sector of the business an airline operates in, there was one pretty common theme last year - load factors across Asia, Europe and North American all improved.

This indication that airlines for the most part did a good job last year of keeping their supply in line with demand, has been key to the stories of many carriers lifting unit revenues for the year.

In turn, this has contributed to IATA's industry profit forecast of $6.7 billion for 2012, just below the 2011 profitability levels.

North American carriers had the lowest collective passenger traffic growth rates of all the regions in 2012. Passenger RPKs increased only 1.2% during the year, but this was set against the continued capacity discipline in the region in recent years. US carriers lifted their collective capacity only fractionally in 2012. They were rewarded with a 0.7 percentage point improvement in load factor and another year of profit, especially before exceptionals took a toll at United Continental and restructuring American Airlines.

america 2012 traffic 

While this supply discipline has been led by the US majors - American, Delta and United all cut capacity in 2012 - it was largely seen across US carriers. Only the relatively small Hawaiian Airlines, Allegiant Airlines and Spirit Airlines put a double-digit increase in their capacity last year.

All this means the North American region is enjoying the highest level of load factors across its airlines. North American airline load factor averaged 83% in 2012. Low-cost carrier Frontier Airlines had the highest occupancy levels at 88.3%, but notably all the North American majors and low-cost carriers enjoyed load factors in the 80s last year.

Overall growth remained strong among Latin American carriers, although recently the fast pace in Brazil slowed as capacity was kept in check. For example, traffic fell 3% at the country's largest low-cost operator Gol after it cut capacity by 5%. The airline's passenger load factor, however, jumped more than one percentage point as a result.

Perhaps counter-intuitively, given the debt crisis that besets the region, European carriers enjoyed the fastest rate of passenger traffic growth in 2012 of 7.1%. This was aided by particularly strong growth by some of the region's fast developing economies, such as Russia and Turkey. Aeroflot, S7 Airlines and Turkish Airlines all enjoyed passenger growth of more than 20%.

europe traffic 2012 

This growth outstripped the extra 5% of capacity Europe's airlines added in 2012, helping to lift collective load factors for the region by 1.6%. This helped put collective load factors for Europe's carrier's just shy of the 80% level.

"One of the strongest growth areas for the European carriers was North Africa, where traffic has been restored since the political turmoil of 2011," notes trade body the Association of European Airlines, adding passenger volumes to South America and the Far East developed well thanks to their booming economies.

Figures from airports body ACI Europe shows passenger numbers at European airports grew only 1.8% last year, and only 0.2% at European Union airports. This was in stark contrast to the near 9% increase at non-EU airports in 2012.

"The eurozone economies may show signs of stabilising, but the 'positive contagion' referred to by the European Central Bank remains elusive when it comes to air traffic," says ACI Europe director general Olivier Jankovec. "This reflects weak business confidence and record unemployment levels in many countries, but also the woes of several European airlines which are downsizing and cutting capacity.

"While there are a few green shoots with air traffic now picking up in Ireland and Portugal, the outlook for 2013 remains grim for EU airports - and still very dynamic for most other ones," he adds. ACI Europe expects only fractional growth in traffic across Europe's airports in 2013.

Asia-Pacific carriers lifted passenger traffic more than 5% last year. Again, traffic growth outstripped additional capacity, helping to lift passenger load factors almost a point to 78.2%.

Growth was more consistent across Asia-Pacific carriers. Japan Airlines, reflecting its slimmed-down form after exiting bankruptcy protection in early 2011, and Malaysia Airlines both saw traffic slip 6%in 2012, but most carriers in the region had single-digit traffic growth.

 asia pacific traffic 2012

While China's strong economic growth has faltered slightly, the country's airlines remained among the fastest growing in the region. Passenger traffic grew nearly 11% at China Southern Airlines and more than 9% at Hainan Airlines.

"Overall, Asian airlines experienced a further year of encouraging growth in international passenger traffic in 2012, bolstered by healthy demand for regional travel," says Andrew Herdman, director general of the Association of Asia Pacific Airlines. "On the other hand, air cargo demand remained depressed for most of the year, only showing some signs of stabilising towards year end. The global economic recovery is continuing, led by sustained growth in Asia and other developing markets, but consumer confidence in developed western markets remains quite fragile," he says. He adds that, overall, the outlook for positive passenger traffic growth is bright and he is hopeful 2013 might bring an overdue recovery in air freight.

"Passenger demand grew strongly in 2012, despite the economic bad news that dominated much of the last 12 months," says IATA director general Tony Tyler. "This demonstrates just how integral global air travel is for today's connected world. At the same time, near-record load factors illustrate the extreme care with which ­airlines manage capacity. Growth and high aircraft utilisation combined to help airlines deliver an estimated $6.7 billion profit in 2012 despite high fuel prices.

Tyler says the industry has started 2013 with some guarded optimism. "Business confidence is up. The eurozone situation is more stable than it was a year ago, and the USA avoided the fiscal cliff," he says. "Significant headwinds remain. There is no end in sight for high fuel prices and GDP growth is projected at just 2.3%."

He says the momentum from the year-end should help passenger traffic come close to the historical growth of 5%. "2013 will not be a banner year for profitability, but we should see some improvement on 2012," he says.