Global Air Cargo Traffic Growth Turned Positive
Air cargo traffic is also recovering after two years of contraction. Led by strong recovery in Asian exports, monthly world air cargo traffic growth turned positive in November 2009 after 18 straight months of decline. Air cargo traffic is now forecast to return to its 2007 peak by the end of 2011.
Growing world trade, stringent inventory control standards, increasing demand for transport of perishable and time-sensitive commodities, and the need to replace aging airplanes will create a requirement for 2,490 freighter deliveries over the next 20 years. About 1,750 of these will be conversions from passenger airplanes.
In the large freighter segment, more than half of the deliveries will be for new airplanes. Although the purchase price of converted large freighters is very attractive and conversions will continue to play an important supporting role, the performance and reliability advantages of new, purpose-built freighters are significant for intercontinental cargo operations, where larger, heavier payloads and range are crucial. Of the 770 large freighter deliveries, 520 will be new airplanes.
Most economies in the Asia Pacific region weathered the recent economic downturn well and are growing rapidly again. With China and India leading the growth among emerging markets, the region’s economy will grow at a rate of 4.6 percent per year for the next 20 years, significantly outpacing the world’s average growth rate. The region will see its share of the world GDP expand from 26 percent today to 34 percent by 2029.
Half of the world’s new traffic added during the next 20 years will be to, from, or within the Asia Pacific region. Total traffic for the region will grow 6.8 percent per year during the period. Driven by economic development and the increasing accessibility of air transport services, traffic within the region will grow faster than traffic to and from other regions. Shorter-haul flying, including domestic travel and international travel within the region, will grow 7.1 percent per year.
The region depends heavily on air cargo to transport goods over difficult terrain and vast stretches of ocean. Some of the world’s largest and most efficient cargo operators compete to transport high-value and time-sensitive exports to markets outside the region. Air cargo growth will total 6.8 percent per year during the next 20 years.
Rising passenger and cargo traffic is creating pressure for fleet growth. To modernize their fleets and meet the growing demand for air travel, Asia Pacific airlines will need 10,320 new airplanes, valued at more than $1.3 trillion, over the next 20 years. The number of airplanes in the Asia Pacific fleet will nearly triple, from 4,110 airplanes in 2009 to 12,200 airplanes in 2029. New airplane manufacturers have seized on the opportunity presented by this huge requirement to develop new competitors for the region’s aviation market.
Forecast deliveries to North America continue to decline as the region’s mature domestic market grows at a modest rate of 2.8 percent over the next 20 years. The majority (78 percent) of new regional-jet and single-aisle deliveries will be for replacement. Growth will be stronger on international services, which will grow 4.9 percent per year, driving demand for 1,180 new efficient twin-aisle airplanes such as the Boeing 787.
After several years of massive losses, the North American industry, led by low-cost carriers, is showing signs of improvement with a small operating profit for 2009. Despite modest profit, traditional network airlines are holding back on large-scale fleet renewals. North America accounts for only 14 percent of the world’s backlog. Airplane age will become an issue as fuel-thirsty, older airplanes weigh increasingly on earnings. Increased attention on aviation’s impact on global climate change will also be a factor in selecting airplanes that produce less carbon emissions.
The commercial aviation market in Europe remains resilient, despite the economic challenges in the region. European airlines took delivery of 340 jet airplanes in 2009. During the next 20 years, the region’s GDP is expected to grow 1.9 percent annually. Europe is forecast to take delivery of 7,190 new airplanes, valued at $800 billion over the same period. Single-aisle airplanes will account for 75 percent of the new deliveries, making Europe one of the top regions for single-aisle operations.
European airlines take environmental responsibility seriously. They are replacing older airplanes with new, more efficient airplanes. By 2029, only 4 percent of the airplanes currently in service will still be flying. The region’s airlines are also investing in biofuel research and working to improve air and ground operations to reduce fuel use and greenhouse gas emissions.
The Middle East continues to outperform the world in air travel growth. The only region in the world where international traffic increased during 2009, the region achieved a robust growth of 11.2 percent. Traffic remains strong as of the first quarter of 2010, with passenger traffic growing 25 percent and air freight 34 percent. Although the region’s oil wealth is certainly a driving force, the remarkable growth of air travel and growing prominence of Middle East carriers also owes to geography, demographics, improved airplane capabilities, and the airlines’ well-coordinated growth and investment plans.
Middle East demographics also favor continued air travel growth. Over half the population is under the age of 25 – the population segment that will account for much of the future market. By comparison, the average age in the United States, Europe, and China ranges from 35 to 45. Governments across the region are supporting more open access for aviation and investing in aviation infrastructure. Over the next three decades, $48 billion is committed to airport projects to significantly increase the number of passengers able to visit Dubai, Doha, Jeddah, Abu Dhabi, Cairo, Bahrain, Kuwait, and Muscat.
New-generation long-range airplanes can reach any point in the world from the Middle East, making the region an ideal connecting point between Europe, Africa, India, and Asia. Gulf airlines using “sixth freedom” agreements, which allow carriage of revenue passengers between two foreign countries with a stop at an airport in the home country, are an attractive, low-cost alternative to nonstop flights offered by European and Asian carriers. Middle East carriers have gained significant market share, with a 64 percent capacity share between the Middle East and South Asia, a 68 percent share to Europe, a 77 percent share to Southeast Asia, and an 80 percent share to Africa.
The major Arabian Gulf carriers have amassed a prodigious backlog of orders for the long-range airplanes necessary to compete in these markets. Emirates currently has 175 airplanes on order, all of them wide- bodied. Qatar has 143 airplanes on order, 123 of which are wide-bodied. And Etihad has a total of 106 on order, including 86 wide- bodied.
Six new low-cost carriers have emerged in the Middle East since 2003, largely targeting the youthful population and the large migrant worker population from India, Pakistan, Bangladesh, and the Philippines. Flying single-aisle airplanes on short- and medium-haul routes, these carriers have ambitious growth plans. Flydubai has 8 airplanes in service and 44 more on order. Air Arabia has 18 airplanes in service and 44 more on order.
Total air travel for Latin America will grow faster than the world average rate during the next 20 years. South American routes will lead the region’s growth, reflecting strong economic growth, continued investment in aviation infrastructure, and liberalization of airline ownership and traffic rights. In fact, the South American air travel market will climb to the seventh largest on our table of world regional flows by 2029.
The ability to offer attractive long-range services is helping the region’s airlines gain market share from global competitors. By 2029, airlines based in Latin America will provide 57 percent of the capacity to, from, and within the region, compared to 46 percent today.
The economies of the Commonwealth of Independent States (CIS) were recovering from a deep recession during 2009, the effects of the global contraction having been more severe in the region than in other emerging markets. The Russian economy shrank a dramatic 7.9 percent and the Ukrainian economy declined 15.1 percent. As of June 2010, the economic rebound has provided moderate relief.
Air traffic, however, has risen strongly. After a 9.4 percent drop in Russian domestic air traffic during 2009, the first quarter of 2010 showed a 33.5 percent increase, according to the Russian Federal Aviation Agency.
The CIS is the only region where there are fewer aircraft in operation today than there were 15 years ago. This reflects more on the changing composition of the airplane fleet than on the market for air travel. In the mid-1990s, less than 2 percent of the CIS fleet was Western-built aircraft – with only a few dozen Boeing and Airbus airplanes in operation. Today, nearly half of the fleet consists of more efficient Western-built airplanes.
The total economy of the continent of Africa is expected to grow 4.8 percent in 2010, following 2.9 percent growth in 2009. The worldwide recovery has stimulated demand, both for African export commodities and for imports to Africa of telecommunication equipment, machinery, pharmaceuticals, and manufactured goods. African airlines are projected to return to profitability for the first time since 2002 in response to the renewed economic activity and bolstered by what IATA Director-General Giovanni Bisignani describes as “a decade of cost-cutting, restructuring, and re-engineering.” Reflecting these developments, projections for African airline profits have been revised from the US$100-million loss anticipated three months ago to a Several trends suggest continued growth in African aviation. The continent’s jet fleet now averages 19.8 years of age in an era when increasing fuel costs require newer, more efficient aircraft. Most of the African fleet is single-aisle airplanes supporting flights within the continent and between North Africa and Europe, traditionally Africa’s principal trading partner. As the demand for African commodities grows and foreign development and tourism increase, African carriers will require a modernized fleet in order to compete on routes historically dominated by foreign carriers.
Kenya Airways to Add Number of Planes and Flight Routes
Kenya Airways will increase the number of planes to serve the demand for international flights and cargo shipments are always increasing from time to time. Kenya Airways, the airline immediately buy Embraer E190 aircraft to provide flight services in various regions and countries.
Kenya Airways Group Managing Director and Chief Executive Officer Dr. Titus Naikuni announced plans to buy the Embraer E190 aircraft before year end. The agreement marks a plane of two model agreements to deliver greater E190 Embraer jet, the first of which is expected to be delivered end of the year. Dr Naikuni said that the plane will be chartered from Jetscape, an Embraer aircraft leasing companies. The Embraer E190 will offer high comfort that is expected to come to the E170’s. In addition will be equipped with state of the art in the chair On the flight Entertainment Technology. Last month, Kenya Airways took delivery of two Embraer 170 long range aircraft, thus their number to five.
Dr Naikuni praised the expected aircraft pointing out that the model was optimum for Kenya Airways regional routes at the 100-seat range. He added that Kenya Airways would be able to fit the aircraft with a business class section which was in high demand on the current E170 routes. “The combination of the E170 and E190 in our network will offer greater flexibility in right-sizing the aircraft to meet route demand, using the same crew and ensuring consistent, high comfort for our passengers”. Today marks a major milestone for us in our fleet modernization program. It is very much in line with our strategy this year to grow the business by improving the service to regional routes. Adding destinations such as Juba and increasing frequencies to Kampala and Kigali required that we increase the size of our fleet,” said Naikuni.
Dr. Naikuni further said: “The Embraer aircraft are modern, efficient and reliable and it is our intention to make this aircraft the backbone of our domestic and regional routes”. He added that the airline would also increase frequencies on all its regional and transcontinental routes to improve the flight choice for passengers and customers and therefore its operational efficiency.
Jetscape Marketing Manager who represented his company at the signing ceremony expressed his organization delight at partnering with Kenya Airways, “ KQ has chosen to add the E190 to its existing E-Jet family of aircraft and we are proud to welcome them as a new Jetscape customer” said Andre Boudreaux. “We sincerely appreciate Kenya Airways’ trust in Jetscape and their confidence in the ability of Embraer’s E-jets to meet Kenya’s stringent demands for the highest standards of quality, safety and customer service.
Currently Kenya Airways uses the Embraer airliner on domestic and short regional routes including Kisumu, Entebbe, Kigali, Bujumbura, Addis Ababa, Djibouti and Juba. The delivery of the two planes came close on the heels of the CEO’s announcement at the investor briefing at the end of last week that the airline would this year continue to acquire narrow bodied aircraft, singling out the Embraers and Boeing 737s as favourites.
European Airline to Offer Cheap Standing Vertical Seat
Looking for a cheap fare on a flight? One European airline may have the newest solution.
Irish budget airline RyanAir will offer discounted tickets for passengers willing to stand during flights, the UK’s Daily Telegraph reports.
The proposed “vertical seats” would be offered in special standing-room only sections in the rear of commuter flights that are an hour or possibly more.
Tickets would cost $7 to $14 per passenger said Mike O’Leary, the Irish airline’s chief executive.
The seats will be tilted slightly upright for passengers to lean against, complete with seatbelts, armrests and a cushion for lower back support.
The cost of adding the cheap standing-room seats will reportedly be made up with charges for using the restroom on the plane.
O’Leary says it will make the fleet lighter and more fuel-efficient, driving down costs and helping to reduce the airline’s carbon footprint.
Safety testing for the new seats begins in 2011.
Airlines Sue FAA Over Crew Rest
Several of the nation’s largest airlines have joined in a lawsuit to block stronger federal rules on crew rest during the longest international flights.
The airlines say that the Federal Aviation Administration bypassed usual rule-making procedures and denied them the right to comment before it notified American Airlines and Continental Airlines Inc. of the new rules in late October.
The petition was filed Dec. 24 in the federal appellate court in Washington by American, Continental, UAL Corp.’s United Airlines, US Airways, JetBlue and two smaller carriers.
In their filing, the airlines said the new requirements would saddle them with “substantial burdens and costs.” They charged the FAA did not show how the rules would improve safety.
The FAA rules would require that pilots on the longest international flights get more rest before flying again. The extra rest would be required even when only 10 percent of flights on a particular route exceed 16 hours.
The FAA was trying to address pilot fatigue, which unions and others have argued is a growing safety concern, especially on flights that can run 16 hours or longer.
American believes that the FAA should follow “the accepted and required process” of giving notice and allowing the industry and public to comment before issuing new rules, said Tim Wagner, a spokesman for American.
FAA spokeswoman Alison Duquette said crew fatigue is a serious safety issue.
“It makes sense for airlines to use an FAA-approved program based on the latest science – circadian rhythm and time-zone changes – to reduce the risk of fatigue to flight crews,” she said.
Delta Air Lines Inc., the nation’s largest carrier, did not join the lawsuit. It agreed to more crew rest before and after the longest international flights while being allowed to sometimes work pilots more than eight hours a day.
In a letter to American, FAA officials said they met with “potentially affected stakeholders” in April, May and June and changed their proposal in response to some of the comments.
Pilot fatigue has become a more visible safety issue as U.S. airlines seek to expand service to Asia, often flying long polar routes.
Airline Industry Sees Pain Extending Beyond the Recession
The recession may have bottomed out, but big U.S. airlines worry that things will never return to the way they were. They may be correct.
The industry has yet to recover from an across-the-board revenue drop that followed the 2001 terrorist attacks. If thrifty consumers and cost-cutting businesses are this recession’s legacies, airlines will be forced to shrink even more.
Growing smaller means parking planes, laying off workers and dropping destinations, meaning potential customers have fewer reasons to book. Earlier this month, Delta Air Lines Inc. cited a gloomy revenue outlook for the rest of the year in its plans to cut more management jobs. If passengers don’t return to the skies and fares don’t rise, some airlines could run low on cash, raising the specter of additional bankruptcies.
Airlines are suffering huge revenue declines as customers put off purchases, trade down to cheaper fares and bank more personal income. Airlines fear that this behavior will stick, exacerbating the “new normal” the industry has been grappling with for the past eight years.
For decades, U.S. airlines could rely on a remarkably stable relationship between their revenue and gross domestic product. Year after year, domestic revenue came in at 0.73% of GDP on average, and total passenger revenue was equal to 0.95% of GDP. That ended after Sept. 11, as travelers stayed home because of the jitters or were put off by new airport-security measures. For the year ended March 31, domestic revenue was 0.54% of GDP, while total passenger revenue was 0.76% of GDP.
“It’s not terrorism this time,” said David Swierenga, an aviation economist. “It’s a sea change in demand.”
Scott Kirby, president of US Airways Group Inc., said the rapid growth of discount airlines is the main culprit behind what he calls “a long-term secular decline” in the revenue-to-GDP relationship. Since Sept. 11, low-cost airlines have grown rapidly, putting downward pressure on fares, while travelers increasingly shop for the cheapest tickets on the Internet. The Transportation Department estimates that budget airlines now account for 40% of the domestic market, up from 22% in 2001. While lower fares stimulate demand, Mr. Kirby said, airlines still wind up losing revenue overall.
As the larger carriers struggled after Sept. 11, low-fare king Southwest Airlines Co. continued to expand, and upstarts such as JetBlue Airways Corp. and AirTran Holdings Inc. unleashed big flocks of new planes. Searching for greener pastures, the larger airlines added many seats on big-margin international routes.
It took a sudden run-up in fuel prices last year to force the industry to reverse course and begin cutting seats and deferring new planes to address the imbalance between supply and demand. But then came the crushing recession, which hit premium cabins on international routes the hardest. Now airlines are reducing capacity on those routes as well, and putting seats on sale.
If the revenue-to-GDP ratio had stayed where it was pre-2001, the airlines would have raked in an additional $27 billion in revenue in the year ended in March, according to the Massachusetts Institute of Technology Airline Data Project. Trying to plug that gap, carriers are cutting costs and adding fees. While this “ancillary” revenue amounts to several billion dollars a year, it isn’t nearly enough.
“What has become clear is there is not enough demand to satisfy the current level of supply at price levels that can sustain profit for the industry as a whole,” said Darin Lee, an aviation expert at LECG LLC.
Discretionary leisure trips are one focus of the new frugality, forcing airlines to counter with deep, extended fare sales to try to stimulate demand. The picture is bleaker among business travelers, who traditionally produce more revenue. Their employers are cutting travel budgets and embracing videoconferencing.
Continental Airlines Inc. said the number of its “high yield” customers — who book costlier refundable tickets closer to their trips or have their travel arranged through corporate accounts — fell by more than one-third in February through May versus a year earlier and was down 27% in June.
Continental President Jeff Smisek, speaking last month after announcing a second-quarter loss, said that when it comes to revenue, “we do think we have hit the bottom. But we don’t know how long we will bounce along the bottom and what the rate of decline will be.”
American Airlines parent AMR Corp. said it saw business travel decline more in the second quarter than its traffic overall or its unit revenue. After announcing second-quarter red ink, Chairman and CEO Gerard Arpey said he has lived through several down cycles but isn’t optimistic about a quick recovery this time: “Whether or not this cycle will be similar to past, I don’t know.”
