As the full-year picture for 2010 takes shape, the strength of the passenger rebound become clear. But for the coming 12 months, all eyes will be on how the industry handles incoming capacity.
Despite the fragility that continues to surround much of the recovery, there is no question that 2010 goes down as a strong year for airline traffic. Passengers, and crucially load factors, sprung back from the lows of 2009.
Out of 75 airlines for which full-year RPK data was available, all but 11 saw a return to growth in 2010. Indeed, 30 enjoyed double-digit RPK growth. This is pretty much the reverse of 2009, when - Chinese and Latin American carriers apart - all but a handful of the same airlines endured heavy falls in traffic.
Carriers in the Asia-Pacific region, which were already recovering strongly in the last quarter of 2009, led the way last year. Traffic data for 18 carriers (see table below) leapt 11%. This growth far outpaced additional capacity, leading to a near four-point lift in load factors among this selection of Asian airlines.
Chinese carriers have been at the heart of this, recording double-digit traffic growth for a year in which the country's economy overtook Japan to become the second largest in the world. China Southern saw traffic jump nearly a fifth, Air China 17%, Hainan Airlines 14%, while China Eastern's growth was further bolstered by its acquisition of Shanghai Airlines at the start of 2010.
Although China grabs the headlines, there was strong growth across the region as a whole. Only the heavily restructuring Japan Airlines saw traffic levels fall during the year. Similarly, the region continues to see strong growth in its low-cost sector. AirAsia, JetStar and Virgin Blue all recorded double-digit traffic increases - the latter aided by its long-haul expansion - while Tiger Airways boosted passenger numbers over one-fifth.
Further evidence of expected growth for the region is evident in IATA's industry consensus forecast, which estimates nearly half of the additional 800 million air travellers by 2014 will fly on Asia-Pacific routes. It identifies China, Vietnam, Malaysia and Sri Lanka among the fastest-growing international markets, while India and the Philippines rank alongside China and Vietnam among the most rapidly growing domestic markets.
"The focus of the industry continues to shift eastward," says IATA director general Giovanni Bisignani. "By 2014, 1 billion people will travel by air in Asia Pacific. That's 30% of the global total and a four percentage point increase from 26% in 2009."
But there was widespread growth across the regions. Latin America continued its strong performance, notably in Brazil. The Gulf carrier giants helped fuel further strong growth in 2010 in the Middle East. Emirates' Dubai hub beat its projections for the year as passenger numbers grew 15% to 47.2 million, while Etihad grew traffic a fifth.
There was also a return to growth among the more mature markets of North America and Europe. The latter, however, is a more mixed picture. A number of carriers continued to restructure, also keeping a close check on capacity. Traffic at carriers such Aer Lingus and Czech Airlines was down over 2009, while many others saw a measured recovery for the year. But others saw sharp growth, including the continued expansion of Norwegian and Turkish Airlines, while Icelandair grew strongly on its North Atlantic business and Aeroflot recovered sharply in 2010.
"Since last summer we see clearly a recovery of the market," says KLM executive vice-president commercial, Erik Varwijk, noting the carrier is returning to pre-crisis levels. "The recovery is there in both business and leisure markets."
Varwijk says long-haul has been consistently strong, but European markets have been more mixed. While some markets continue to struggle, other such as the Nordic countries and the fast-rebounding Russian and eastern Europe markets have been more buoyant.
BACK ABOVE 2007 LEVELS
Of course, a large jump in 2010 passenger traffic could be anticipated, given the widespread slump in 2009. Perhaps more noteworthy is a comparison with 2007, the industry peak before spiking fuel prices and the financial crisis. On a like-for-like basis, European and North American carrier traffic is marginally leading in 2010 against 2007. But Asian carrier traffic is more than 10% ahead, even without taking into account the region's fast-growing low-cost carrier segment.
Significantly for the profitability of the industry, traffic growth across the regions in 2010 outpaced the additional capacity, lifting load factors and helping yields to climb off the floor.
But this is not expected to be the case in 2011. While passenger traffic will continue to grow, IATA's December forecast for 2011 predicts this traffic growth will fall short of additional capacity across all the regions.
Managing additional capacity in 2011 - a year which will see a record number of deliveries from Airbus and Boeing - is key to industry profitability. The big unknown is what impact high fuel prices, which have for example already prompted Delta Air Lines to scale back planned capacity increases this year, may have on airline capacity plans this year.