Chris Tarry takes a look at revenue developments around the world. Analysis by Flightglobal Insight
The route back from a downturn is volume, then value, with capacity control keeping yield recovery on track. But a more immediate element is traffic mix. For the first five months of 2010, IATA's Premium Traffic Monitor has highlighted a bounce back. Premium traffic was almost 11% up on the corresponding period in 2009 and, in May, premium revenue was some 44% up on May 2009.
But while most regions of the world have seen a sharp recovery in long-haul business travel, the pace of industry recovery is "multi-speed". Airline type is a significant factor, alongside location, geographic exposure and capacity control.
The latest results season shows a large number of legacy carriers are actually recovering better than their low-cost rivals. This is because they are geared to the pick-up in long-haul business traffic and in a number of markets there is real evidence that personal travel is still slow in returning. For some low-costs, growth is also impacting their unit costs and yields.
So, the mix is improving, particularly for international legacy carriers. Those airlines in or with meaningful exposure to Asia have seen the greatest overall impact, but there has been a strong recovery on the Atlantic markets too.
For example, United's July unit revenues were up 22-23%. And, for the second quarter, its Atlantic unit revenues rose by a third, offsetting the 22.5% fall between Q2 2008 and 2009. The Pacific was also up 52%, compared with a 28.9% decline a year earlier.
Over in Asia, Q1 yields at Singapore Airlines rose 14.7% and Cathay's first half yields were up 17.5%. Qantas' second half group yields were up on FY2009 and 6.4% higher than in the first half.
In Europe, however, we are seeing a bleaker picture. Lufthansa posted a 2.8% drop in its European yields, while Middle East and Africa were up just 0.6%. But a 13% increase on its Americas routes and 12.2% in Asia Pacific pushed its overall yields up 7.4%. British Airways also managed to deliver 13.5% first quarter yield growth.
But SAS warned its June yield was down 9% as pressures in the short-haul market overwhelmed "the relatively strong performance on long-haul routes". Local rival Finnair posted a 5.8% Q2 unit revenue improvement, as business passengers travelling on its Asian routes rose by a huge 40%.
Shifting to the low-cost segment, the fallout from the ash cloud blurs this quarter's European results, but the weak consumer background and growing capacity continue to have an effect. Ryanair's Q1 average fare, including bag charges, rose €2 ($2.60) to €39, but this is still below levels back in Q1 2006.
EasyJet's Q3 passenger revenue per seat rose 4.5%, but its unit ancillary revenues were slightly down. Norwegian's third quarter passenger yields fell 15%, against just a 1% drop in unit costs. And while ancillary revenue per passenger rose by NOK12 ($1.90), the average fare appeared to fall by some NOK50.
Despite the sharp recovery, in many cases yields are still significantly below the pre-downturn peaks. IATA estimates this shortfall to be around 15%. Verifying this, Qantas says its FY2010 yields were 11% below FY2008.
In reality, industry performance is largely dictated by external events. Ipsos Mori performs a global opinion poll on the economic outlook. Its latest results show just 18% of US respondents believe the outlook is "good or somewhat good", while in the more upbeat markets of China and Brazil, the figure is 77% and 65% respectively. On a global basis, this response has risen to 39%, compared with 29% as the trough neared. But this is still a long way from the 66% as we approached the peak. Perhaps this is why in some areas, particularly in Europe, leisure and "private travel" remains sluggish.
Then there is the issue of oil prices, which are 13% up on a year ago, adding $17 billion to the industry's anticipated 2010 fuel bill. Offsetting this will require a 4% increase in yields. But fares rise more when there is excess demand and aircraft returning from the desert mean overall capacity this winter may be almost 6% higher than a year ago. Intra-European capacity is expected to go up 9%, while intra-Asia and intra-North America will rise by 2%. These are certainly interesting times.
Source: Airline Business