Bangkok--6 May--Centre for Asia Pacific Aviation A review of first quarter worldwide airport and airline traffic performance reveals a reasonably healthy increase in demand, despite the growing economic challenges. But the outlook for the remainder of 2008 is much less favourable. IATA — US slowdown spreads to Asia The International Air Transport Association (IATA) reports worldwide scheduled international passenger traffic (RPKs) rose 5.8% in Mar-08, although adjusting for the early Easter, growth in the month was 4%, with an adjusted industry load factor of 76.1%, down 1.7 ppts year-on-year. For the first three months of the year, the unadjusted increase in worldwide international RPKs (including the flattering impact of an extra day in Feb-08 and the early Easter) was 6.6% year-on-year. But capacity (ASKs) rose 6.9% in the same period, leading to a slight fall in average load factor to 75.6%, reflecting the slowdown in demand growth that began in Dec-07. International freight growth remains “sluggish”, rising 3.2% (unadjusted) in Mar-08, and well below the 4.3% growth recorded in 2007, according to the airline body. IATA reports Asia Pacific's (unadjusted) traffic (RPKs) slowdown in growth in Mar-08 to 4.3% was “significant", in that the region’s booming economies "were expected to immunise them from the US slowdown”. Middle East carriers saw a double-digit increase of 15.4% reflecting the expanding economies in the region, but even this is a “significant downward step” from the 20.4% recorded in 2007, according to IATA. AAPA — losing cushion of demand outstripping supply The Association of Asia Pacific Airlines (AAPA) meanwhile stated that international passenger demand trends “remained positive” in 1Q08, with traffic (RPKs) growing by 4.6% (unadjusted). However, the continued weakness in the airfreight market meant that AAPA cargo FTKs grew by only 2.9% for the quarter. The Mar-08 data told a similar story. International passenger traffic (RPKs) grew by 3.8% year-on-year (unadjusted), in line with capacity growth, keeping the average passenger load factor unchanged at 78.5%. International freight traffic (FTKs) expanded by just 2.0%. The cargo load factor, however, improved 0.7 percentage points to 67.9% on marginal capacity growth of 0.9%. Overall, AAPA members have lost their cushion of traffic growth outstripping capacity in the past two months. A tipping of the balance (ie an easing of load factors) would exacerbate an already extremely difficult environment as fuel costs surge. ACI — domestic passenger numbers weaken Airports Council International (ACI) reports continued growth in airport passenger traffic in Mar-08, again fueled by a very substantial increase of over 7% year-on-year (unadjusted). Domestic passenger traffic growth was flat at 1%, which held down the overall traffic gain to 3.5%. During 1Q08, worldwide passenger traffic rose 4.5% year-on-year, led by international (+7.6%), while domestic rose 2.3% (unadjusted). ACI reported some “isolated phenomena” that affected results in some markets. The airport body observed a “substantial drop” in the highly sensitive Japanese travel market in Mar-08, particularly to China, which appears to be linked to food poisoning fears in China and the political situation in Tibet. Worldwide freight traffic for Mar-08 was flat, with a 4% rise in international freight and a “stark decrease” of 7% in domestic freight (unadjusted). Only Asia Pacific showed positive domestic growth in the freight sector. Outlook - warning bells being sounded IATA Director General and CEO, Giovanni Bisignani, stated that the traffic figures “only tell part of the story”. The fortunes of the airline industry have, according to Mr Bisignani, “taken a major turn for the worse”, with “astronomical oil prices hitting hard”, while the “buffer of an expanding economy has disappeared”. In the face of such dramatic shifts in the global economy, Mr Bisignani added that industry consolidation has become “critical”. While welcoming proposed consolidation moves in the US, Mr Bisignani stated it “makes no sense” that consolidation is limited to US domestic partners. He again called on US-EU open skies negotiators to deliver a “modern approach to ownership rules” in their second stage talks this month. AAPA Director General, Andrew Herdman, stated that “clear evidence” of a slowing global economy, coupled with “cripplingly high” fuel prices, meant the outlook for the remainder of the year is “decidedly less optimistic”. He added the doubling of the oil price compared to a year ago has already triggered the collapse of several carriers around the world, “and even well-capitalised and well-run airlines are bracing themselves for further turbulence in the months ahead”. ACI Economics Director, Andreas Schimm, expressed further concerns about passenger and freight markets, stating, “in addition to the overall negative effect of global financial and economic data, airports report a direct impact on traffic from freight carrier business declines, as well as fewer scheduled passenger flights, which also lowers volume capacity”.