IATA blames Eurozone crisis for slowing demand growth

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Growth in global passenger traffic continues to taper off as the worsening Eurozone crisis takes its toll on demand for air travel, IATA says in its latest monthly update.

While passenger demand rose 4.5% year-on-year in May, this marks a deceleration from 6.1% growth in April and 7.6% growth in March.

Freight demand fared even worse, falling 1.9% compared with the same month last year and 0.4% against April 2012. The weak performance continues a sideways trend initiated when cargo traffic bottomed out in the fourth quarter of 2011.

Downplaying optimism about the recent fall in jet fuel prices, IATA director general Tony Tyler says cheaper crude oil merely reflects the stagnant macroeconomic climate.

"The softness in oil markets comes on the back of fears of deterioration in the European economy," he notes.

"Business and consumer confidence are falling. And we are seeing the first signs of that in slowing demand and softer load factors. This does not bode well for industry profitability. Airlines are expected to return a $3 billion profit in 2012 on $631 billion in revenues. That's a razor-thin 0.5% margin."

Passenger capacity growth trailed traffic growth in May, rising by 4% compared with 4.5%, while load factors dropped from April's record high of 79.3% to reach 77.6%.

The Middle East was the only region which saw accelerating growth in international passenger demand for May, recording a 15.8% year-on-year increase against a capacity hike of 11.9%. April passenger growth for the region had come in at 15.2%.

By contrast, European carriers saw 4.1% growth in May against 5.7% in April; North American carriers saw 1.5% against 1.6%; and Asia Pacific carriers saw 5.5% against 8.6%.