I am pleased to present you herewith IATA’s assessment of premium and economy travel in December 2011.
• Air travel in both premium and economy markets strengthened in December: 3.7% and 7.3% higher than in the previous year.
• Over the past 2 months, premium travel has expanded further than economy, improving the mix for airlines and lending some support to yields.
• Although premium travel strengthened at the end of 2011, the trend for the previous 8 months had been flat at best. However, economy travel continues to trend upwards, albeit at a slower pace than in the first half of 2011.
• During the year as a whole, premium travel markets grew 5.5%, with economy travel growing 5.1%. Although this performance is in line with historical averages, it was a slowdown compared to the post-recession rebound in 2010.
• Despite financial instability in the Eurozone, travel markets within Europe expanded by 5.1% in 2011. In fact, growth on all of the larger routes continued at a robust pace during the year.
• Business confidence – which leads premium travel by several months – has now turned up in the past 2 months and is pointing to increased business activity. As a result, we would expect some increase in business travel, lending some support to premium travel in the months ahead. However, growth risks from the Eurozone banking crisis remain.
TRAFFIC GROWTH BY MAJOR ROUTE
The strongest of the larger air travel markets in December were within-Europe and Europe-Far East. Exports from some central and northern European markets to growing Asian economies may account for the strength of Europe-Far East markets, but less so for travel within Europe, where export demand from important markets like France and Italy is waning. Premium travel within Europe grew 3.7% in December year-on-year, while in November traffic had contracted 0.3% compared to the same month in 2010. Although this strong performance is incongruent with the present instability in the Eurozone, recent survey and hard data indicate an expectation of stabilization in the Eurozone at a low level. Expectations of improvements in the Eurozone economies may have managed to deter businesses from cutting back on travel in current months. Nonetheless, the dependence of air travel’s strength on European markets is a weak basis for future growth. The outlook remains subject to downside risks.