Steady, more profitable growth in 2006

GENEVA – The International Air Transport Association (IATA) 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.
“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% per year 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.