Middle East carriers saw year-on-year passenger growth demand expand by 10.6 per cent in February--the strongest among all the regions, said a report released by the International Air Transport Association (Iata).

Capacity expansion was held to 9.7 per cent with the result that load factor rose 0.7 per cent points to 77.7 per cent, again the highest for any region, the report added.

Global passenger demand rose 3.7 per cent compared to February 2012, the report said, adding that demand growth is accelerating on the back of stronger business confidence, particularly in emerging regions.

The 3.7 per cent growth masks improvements in recent months. October 2012 appears to have been a turning point for air travel markets. Since October, passenger demand has been growing at an annualized rate of 9 per cent. This is almost double the growth trend over the first 9 months of 2012.

“February’s performance was good news. Demand for air travel continues to rise on economic optimism and improved business confidence. But that comes with a few caveats. Much of the growth is concentrated on emerging markets. Europe continues to be a laggard. And the handling of the banking crisis in Cyprus has reminded all of us that the deep problems in the Eurozone economies still remain,” said Tony Tyler, Iata director general and CEO.

Capacity was up 1.0 per cent on the previous February and the industry load factor stood at 77.1 per cent. “Airlines are carefully managing capacity expansion, which is keeping the load factor at a record high. This is helping the industry to remain profitable despite persistently high oil prices.”

February international passenger demand was up 3.6 per cent compared to the year-ago period, and 0.9 per cent compared to January. Capacity rose 1.1 per cent versus February 2012 and load factor climbed 1.8 percentage points to 76.3 per cent.

African airlines’ traffic climbed 7.7 per cent compared to February 2012, second best among the regions, while capacity rose 3.9 per cent, boosting the load factor 2.3 percentage points to 65.2 per cent. The rise in load factor commenced in mid-2012, supported by an increase in demand and also from tighter capacity management.

Domestic markets climbed 3.9 per cent in February compared to a year-ago, driven primarily by surging demand in China, as all other markets experienced declines with the exception of Australia, which rose 2.2 per cent. Total domestic capacity was up 0.8 per cent compared to February 2012 and load factor rose 2.3 per cent points to 78.8 per cent.

On March 20, Iata raised its outlook for the industry’s earnings performance to a net profit margin of 1.6 per cent from 1.3 per cent.

“The industry’s fortunes appear to be moving in the right direction. But the margins are wafer thin. And any shock—the continuing Eurozone crisis or budget sequestration in the US—could negatively impact the outlook,” said Tyler.

Budget sequestration measures began to take effect on April 1.  Alongside the economic impact of uncertainty and reduced government spending, operational concerns are significant. Passengers in the US could face flight delays and even longer lines then usual at security and border control.

“It’s unfair that air travelers should suffer the impact of sequestration given that airlines and passengers already pay around $4.5 billion a year in fees and taxes for the essential services of border control and airport security,” said Tyler.

“It is unlikely that the savings that will be achieved from sequestration will offset the damage to the economy if air travel is discouraged by these cutbacks. Aviation is an important catalyst for economic growth and prosperity. The cost of the shocks, uncertainty and unpleasant surprises can only hamper efforts to revive the economy. The government’s priority should be on extracting the greatest economic benefit possible from aviation—not making it more difficult to do business,” he concluded. – TradeArabia News Service