Passenger markets

Passenger markets – IATA Annual Report 2010 – Page 10

The recent cyclical downturn was the deepest experienced by the commercial airline industry since the 1930s. Early 2009 marked the low point for international air travel markets. From the early-2008 peak to the early- 2009 trough, premium travel fell 25%. Economy travel fell 9%, the decline softened by a shift to cheaper seats.

From mid-2009, air travel markets began to turn upward, boosted by the massive fiscal and monetary stimulus measures taken by governments. By the end of 2009, premium travel had risen 11% and economy 7%. But while the number of passengers traveling on economy seats was within 3% of the 2008 peak, premium travel lagged 17% below its previous high point.

An important question was whether the decline in premium travel was a structural shift or simply a cyclical downturn, to be followed by an upturn. This market segment generates a disproportionate amount of profit for network airlines, particularly in long-haul markets.

Many passengers traveling on premium seats are on business, which is driven by international trade and financial activity. Growth in premium travel fits closely with world trade trends. This is consistent with the view that the loss of premium passengers early in 2009 was due to the unprecedented downturn in economic activity and world trade and not to a structural loss.

Overall, passenger demand dropped 2.1% in 2009. By December, though, traffic was up 8.4% on the February low and was rising at an annualized rate of 9% in the first quarter of 2010. The travel upturn during late 2009 and early 2010 was not even across markets. Weak economic activity in Europe, and to a lesser extent in North America, led to travel remaining fragile within and between these important markets. By contrast, strong economic recoveries in Asia and South America generated robust upturns in travel in those markets. Middle Eastern travel markets benefited from regional economic growth and continued market share gains in longhaul markets connecting over Middle Eastern hubs.



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