Demand for international air travel has soared in 2004, finally bringing to an end the three-year slump in overseas travel that followed the terrorist attacks of Sept. 11, 2001, new international statistics show.
But airline experts say the long-awaited rebound in international travel is unlikely to translate into a matching growth in profits, because rising fuel costs and growing competition in domestic travel are still dogging the world's largest airlines.
A report released Wednesday by the International Air Transport Association (IATA) shows a 20.4-per-cent jump in international passenger traffic in the first half of this year, compared with the same period last year, as well as a 13-per-cent increase in international cargo traffic.
IATA director-general and chief executive officer Giovanni Bisignani said the growth “substantially exceeded our expectations” for 2004.
“The industry's traffic performance in recent months is impressive,” he said.
IATA said the growth was the result of a strong recovery from the SARS crisis of 2003, in which international travel dropped sharply, as well as an improvement in demand trends and the impact of international economic growth.
But the industry has not just recovered from the particularly low base of 2003. IATA said travel demand in 2004 also compares favourably with 2000, which is considered to be the last normal year for the international airline industry before the 2001 terrorist attacks.
International passenger traffic this year is up 8.4 per cent from the same six-month period in 2000, while the average load factor — the proportion of available seats that were filled — is up 1.4 percentage points from 2000 levels.
IATA measures international travel of 270 airlines comprising 95 per cent of international scheduled air traffic. The numbers do not include domestic travel.
“I think it's fair to say that we're certainly back to a pre-9/11 type of demand for air travel,” airline analyst Cameron Doerksen of Dlouhy Merchant Group in Montreal said Wednesday.
For most major international airlines, the year-over-year growth is related to a rebound in travel to Asia. But Mr. Doerksen said other markets, such as Europe, are also seeing improvements.
“Last year was a particularly bad year for the airlines, so it's bound to be better this year,” he said. “But even if you look at the traffic versus 2000, which was sort of the last normal year for the airlines, you'll find that overall traffic is actually doing okay.”
But while airlines no longer have a problem with passenger demand, they are facing soaring fuel costs, which are eating into their profitability. Mr. Doerksen said the other problem for traditional mainline carriers is the growing competition on domestic routes from new airlines.
The result, he said, is that there have been no soaring profits to match the growing passenger demand. In the second quarter of 2004 in the United States, for example, he said few airlines actually reported a profit.
He said he expects to see a similar trend at Air Canada, which has not yet reported its financial results for the second quarter of 2004.
Nonetheless, the greater passenger demand has started to help profits in some areas of the industry, and has led to projections for better future growth.
Spanish airline Iberia Wednesday reported that it more than doubled its profit in the first half of 2004, as a result of tight cost controls and growing passenger demand. Aircraft maker Boeing Co. Wednesday raised its outlook for 2005, because of projected rising sales for commercial jets. And rival Airbus SAS increased its forecasts even more aggressively last week, saying it expects up to 50 per cent more output by mid-2006.
Air Canada has reported its traffic figures for the first half of 2004, showing especially strong demand for Asian and South American routes.
Air Canada spokeswoman Laura Cook said the airline has benefited from a returning demand in those areas, but has also added a lot of new capacity in those regions. In Asia, she said, passenger traffic has increased threefold in the first six months of this year.
“Not only are we seeing a recovery in the international market, but we're also seeing our commercial strategy pay off,” she said.
For example, she said the airline has added service to Delhi, Buenos Aries and Santiago in the past year. And it is now expanding more routes to South America, including Caracas, Bogota and Lima.
She said, however, that rising fuel costs are also boosting expenses for the airline. Fuel is Air Canada's second largest expense, after employee salaries.
Mr. Bisignani said IATA now believes that if current trends continue, international passenger traffic for all of 2004 could grow more than 10 per cent — a substantial improvement from IATA's March forecast of 7.5-per-cent growth for the year.
This could help the industry break even in 2004, he added, although “many urgent problems still challenge our business.”
