IATA: 2006 sees slow but profitable growth

The International Air Transport Association has released
full-year traffic results for 2006 showing slower but more profitable
growth. Global passenger growth slowed from the 7.6% recorded in 2005 to
5.9% in 2006.  While the cargo growth rate increased from 3.2% in 2005
to 4.6% in 2006, it remains below the historical growth trend of 5.6%.
Average passenger load factors in 2006 rose to a record high of 76.0%,
up from 75.1% in 2005.

“The lesson for 2006 is that pursuing profitable growth pays off. While
passenger growth slowed, the bottom line improved. The industry showed
an estimated operating profit of US$10.2 billion for 2006 while net
losses were reduced to a projected US$500 million. Cost reduction,
improved efficiencies and careful capacity management have positioned
the industry to achieve a projected net profit of US$2.5 billion in
2007,” said Giovanni Bisignani, IATA’s Director General and CEO.

The Middle East was the fastest growing region for both passenger and
cargo recording full-year growth of 15.4% and 16.1% respectively.

Although the cargo growth rate improved marginally to 4.6%, the key
markets of Europe and Asia were relatively subdued at 1.7% and 4.7%
respectively. High fuel costs and strong competition from other
transport modes (particularly in Europe) constrained growth in 2006.
North America was the most improved market as freight growth increased
from 0.4% to 6.0% as airlines switched capacity towards cargo.

All regions except the Middle East saw a decline in passenger traffic
growth rates compared to 2005. The largest decline was in Latin America
where 11.4% growth turned to a 2.4% contraction in 2006, primarily due
to restructuring of the industry in the region. North America saw the
second largest decline-from 8.9% to 5.7%-as carriers withdrew
unprofitable capacity.

ADVERTISEMENT

“Load factors-at a record high of 76.0%-were the good news story for
2006,” said Bisignani. North American carriers led the way with an 80.2%
load factor, up from 79.5% in 2005. Load factors improved in all regions
except the Middle East and Africa.

“The focus for 2007 is efficiency. Slower traffic growth rates and a
less buoyant global economy will impact revenue growth. Industry-wide we
expect revenue growth to slow from 8.0% in 2006 to 4.5% in 2007. While
lower oil prices are a welcome relief, they remain around
US$60/barrel-more than double the price in 2000. Bottom line improvement
depends on achieving further efficiencies across the board. Airlines
have reduced non-fuel unit costs by an average of 3.5% over the last
five years. It is time for our industry partners across the value
chain-including airports and air navigation service providers-to deliver
similar results,” said Bisignani.
——-