European network carriers register passenger increase of 3.4% in first half Of 2012

But market growth strongly contrasts financial performance impacted by fuel prices and external costs, warns AEA

In the first six months of 2012, passenger numbers of the Association of European Airlines’ (AEA) members increased by almost six million, to 177.6 million, a growth of 3.4% compared to the results of last year. Measured in passenger-kilometres, the growth was even greater at 5.5%. This was double the increase in seat capacity, leading to an improvement in passenger load factor of two percentage points to 77.1%. A part of the increase could be attributed to two factors which depressed traffic in the corresponding period in 2011 – the political turmoil in North Africa and the Japanese earthquake and its aftermath.

Cross-border traffic within Europe increased by 3.8% but domestic passenger traffic growth came to a standstill. The passenger traffic to South America registered a strong growth and reflects the economic boom of several countries in the region.

Air cargo, a key enabler for economic development but also often a leading indicator of market trends, is strongly underperforming with a decline of 4.9%.

The paradox

European network carriers face a paradox as the air travel growth strongly contrasts the financial situation. Passenger numbers throughout the first two quarters of the year showed a continued but moderate growth but, as in 2011, airlines are not able to offset the high rise in fuel and external costs. The market is clearly not able to absorb higher fares due to the challenging situation of the European economies.  As a result, airlines are confronted with worsening financial results as surging fuel costs have erased their profitability.

Most of the airlines have implemented further rounds of cost-cutting, capacity adjustment and revenue improvement programmes. The effect of these programmes will start to deliver in the upcoming months. Fuel prices have dropped since April, but due to the negative euro/dollar evolution and the hedging programmes already in place, headwinds persist: the benefits of falling fuel prices are so far limited.

“2012 was foreseen with a gloomy, uncertain economic outlook and our forecasts are proving to be accurate”, says Athar Husain Khan, Acting Secretary General of the Association. ”According to our latest analysis, we forecast for our members a EBIT (earnings before interest and tax) loss of about 1.5 billion euro in 2012. Despite the extremely challenging financial situation we see that external costs imposed on the airlines by third parties continue to rise. European airlines are taking their responsibility to overcome the current challenges but they need a fertile soil in order to strengthen their positions in the global playing field and to accelerate their contribution to the much-needed recovery of Europe’s economy.”

AEA has just released its annual S.T.A.R. (Summary of Traffic and Annual Results) report. S.T.A.R. is an unrivalled source of AEA member airlines’ data and an essential resource for researchers, analysts and planners, with a wealth of passenger and cargo data by airline and by region as well as aggregate yield revenue information. Researchers, analysts and planners can order a copy by going to AEA website.