The expansion in the number of international air passengers slowed in June to an increase of 2.4 per cent compared to the same month last year, said a report released by the International Air Transport Association (Iata).

Although international air travel was 3.7 per cent higher in the first half of this year compared to the first half of 2013, passenger numbers rose by only 0.7 per cent between December and June, the report highlighted.

Most of the growth in the past year took place in the second half of 2013, when business confidence and economic activity grew relatively strongly. The recent slowdown has been partly hidden in the year-on-year growth rates during January to May by the carryover effect from the strong end to 2013.

Travel on premium seats slowed a little more than growth in economy travel, with a June year-on-year growth rate of 1.8 per cent compared to 2.5 per cent. However, these year-on-year figures were distorted by the comparison with volatile figures last June.

In the first half of 2014 premium travel expanded on average at a slightly faster rate than economy travel, at 3.9 per cent compared to 3.7 per cent.

The share of premium revenues has risen further to just under 29 per cent in June – a rise of a bit less than 1 per cent point during the past year, as premium yields have held up more than yields on economy seats. This has partly been due to the mix of routes, with the strongest premium travel growth occurring on the longer - haul markets where the share of premium revenues is greatest.

This has helped the financial performance of the longer– haul network airlines, compared to shorter-haul mainly leisure travel focused airlines in some, though not all, regions.

The stronger growth of longer-haul markets has meant that RPKs revenue passenger kilometres) are growing at a much faster pace than passenger numbers, said Iata in the report.

June’s expansion of 2.4 per cent in international passenger numbers compares to a 5.5 per cent growth in international RPKs. Usually the gap in growth is 0.5 - 1 per cent points, so today’s situation is unusual.

The profile of air travel growth, with a strong second half in 2013 and slower growth during the first half of 2014, has been driven by wider economic developments. World trade also had a strong second half last year, but has expanded by only 0.4 per cent so far this year and industrial production has followed a similar if slightly stronger profile.

Business confidence - an excellent leading indicator–similarly rose sharply in mid-2013 before flattening off and  then deteriorating early this year, following the emergence of a number of potential threats to the global economy.

However, in recent months business confidence (as measured by the PMI Index in the second chart below) has started to rise once more, as worries about the impact of geopolitical developments and US Federal Reserve monetary policy appear to have diminished.

“If this improvement continues, which is the consensus view now, then we would expect international air travel growth to accelerate during the second half of this year,” Iata said in the report.

Major areas of weakness in international air travel are concentrated on markets connected to a number of key emerging economies.

The important Within Far East market saw an exceptionally weak month in June, down 4.2 per cent on total traffic compared to last year. Nonetheless, the whole of the first half has been weak for such a potentially dynamic region, with an average of - 0.1 per cent year-on-year. The Within South America total market has also been weak, falling 3.8 per cent during the first half of this year.

African markets are also noticeably weak, despite relatively good economic growth in many Sub Saharan economies.

The Ebola outbreak has yet to impact the data on African markets and, at this stage, there is no indication whether it will. However, travel has been discouraged by political unrest in parts of North Africa. The still important Europe –Africa market remains weak because of these reasons and continued economic weakness in continental Europe.

The exception for Africa has been the Africa-Middle East market, which is being sustained by flows of workers and business travel stimulated by new South-South trade lanes. – TradeArabia News Service