Air Travel to Take Off As Public Wealth Rises
By Boonsong Kositchotethana, Bangkok Post, Thailand
Dec. 30–People’s rising income and wealth, as well as their love of flying, will increase the number of air travellers by 500 million, or 25 percent, by 2010 from this year’s estimated tally of two billion.
The largest addition within the 2006-10 period will be intra-Asia, where economic and travel growth is particularly strong, at 222 million to 678 million, the largest among all other geographical segments, according to the latest forecast by the International Air Transport Association (IATA).
But even the more mature, slower-growing European and US domestic markets will, by virtue of their size, see large numbers of extra passengers wanting to fly over the next four years, said Brian Pearce, the chief economist of the global coalition of 250 airlines.
Key drivers to the growth within Asia are the two emerging economic superpowers, China and India, while the fast-growing markets in Europe are the countries that have recently joined the European Union including Poland and the Czech Republic.
But Mr Pearce warned that the airlines’ ability to meet demand would be constrained by a lot of problems, including inadequate airport infrastructure, especially in Europe and many parts of Asia.
Climate impact and environment policies also restrict the aviation industry’s ability to respond to future demand.
Underscoring this trend, the IATA chief economist cited the case of British authorities’ rejection of BAA Plc’s request to raise passenger numbers through London Stansted airport on the grounds of climate impact from emissions.
Stansted, the third busiest airport in the UK, handles 41 scheduled and charter airlines and 23.5 million passengers a year.
In his analysis of the traffic growth pattern, Mr Pearce noted that much of the increase in air passengers since 2000 had been entirely in economy class, which was up 50 percent.
By contrast, the number of business-class travellers had been flat from 2000 before picking up steadily since 2004.
New budget carriers have also contributed to the growth in economy-class traffic, especially in Europe since 2000, where 29-30 percent of short-haul seats are now supplied by these airlines.
However, contrary to general belief, there is no evidence that the low-fare traffic stimulated by low-cost carriers (LCCs) has led to a big surge in air traffic.
Mr Pearce cited a recent study conducted by the UK Civil Aviation Authority which pointed out that LCCs had taken market share, particularly from charter airlines, and overall market growth had shown no sign of accelerating from growth rates in the 1980s and early 1990s.
The study concluded that air travel was rising because of people’s growing wealth, not because air travel in any sense was too cheap or growing so fast because of subsidies, or because taxes are too low.
Moreover, business travel markets still have significant growth potential, such as between Europe and Asia.
Having lost US$41 billion since 2001, the world’s airline industry is poised to reduce its loss to $500 million this year and to report its first profit since 2000 with about $2.5 billion next year, according to IATA.
Were it not for the $6-billion restructuring costs at Delta Air Lines and Northwest Airlines, the whole industry would have already been in profit, which was quite an achievement since oil prices were expected to average $66 a barrel, increasing the industry’s fuel bill by 23 percent to $112 billion this year, he said.
But IATA warned that a significant economic downturn would hurt a fragile airline industry. The improvements in operating profitability look set to stall, as the airline industry will grow more slowly in 2007.
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Copyright (c) 2006, Bangkok Post, Thailand
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