Premium Traffic

IATA notes contracting premium travel demand while Cathay Pacific outlines premium economy product

The share of premium seats as a portion of total travel is contracting, with premium seat share falling back towards the lows of early 2009 when it touched 7.5% of total traffic, according to airline industry body IATA. Given the continued growth in economy travel, IATA believes it is probable there has been a degree of substitution away from premium travel to economy, as businesses seek to cut cost in difficult economic conditions.

This changing seat class mix will undermine yields, and hence profitability, with IATA also warning that stagnant international trade and declining business confidence points to further weakness in business travel and a challenging profitability environment for airlines in 4Q2011. IATA has previously commented on the increasing movement towards premium economy travel, which IATA includes as part of the ‘economy’ category. “In recent months, that structural downshift has been joined by the start of a new cyclical downturn,” IATA said last month.

Stronger than expected premium traffic in Sept but structural shift in premium demand evident: IATA

International demand for premium-class travel again rebounded in Sep-2011 despite declining business confidence and economic uncertainty and early signals of a decline, IATA said. "We have pointed to the lack of further growth in international trade and the sharp declines in business confidence as reasons for expecting a decline in business travel and premium seat sales. So far, this has not happened," IATA said, while noting: "It still looks a matter of time before the deteriorating economic conditions pull premium travel lower."

This stronger-than-expected growth in premium and overall passenger levels in Sep-2011 has had a positive impact on airline yields and profits in 3Q2011. Correlating with the improvement in premium traffic volumes in Sep-2011, there was an improvement in premium revenues in Sep-2011, following a marked decline in Aug-2011, with declines in premium revenues to the lowest levels in 16 months. IATA noted that it “had not expected the strength to continue this long” although, given deteriorating business confidence, weakening international trade and strained economic conditions, IATA expects the situation to deteriorate and slow in the months ahead. 

Why Tony Fernandes' new possible premium airline isn't a competitor to Qantas' Asian premium carrier

It is tempting to portray Tony Fernandes's possible new premium airline as being in contention with Asia's only other planned premium carrier, the one from Qantas, an airline that has ties to Mr Fernandes. But the premium market in Asia is nascent, and based on the few known details of the carriers, they are pitched at different segments. A closer look is in order.

Premium passenger numbers fall sharply in Aug-2011 further slowdown expected in months ahead: IATA

IATA has warned that “widespread” declines in international trade and business confidence is having a notable impact on global air travel demand, including in India and China. “Forward-looking indicators for air travel, particularly travel on business, continue to point to a further slowdown in the months ahead,” the trade group said. 

International business travel fell sharply at the end of Aug-2011, following an unexpectedly strong start to the month. Premium passenger numbers rose just 2.3% in Aug-2011 on a year-on-year basis, following growth of 7.5% in Jul-2011, with premium travel falling back to levels last seen in 4Q2010. Correlating with the decline in premium traffic volumes, there was also a marked decline in premium revenues in Aug-2011, which declined to the lowest levels in 16 months.

Premium demand strengthens in Jul-2011 but short-term outlook “gloomy”: IATA

International airlines saw demand strengthen in Jul-2011 despite "gloomy" leading economic indicators, IATA said on 19-Sep-2011, ahead of its industry earnings outlook release. IATA said forward-looking indicators for business travel looked "gloomy," and suggested that a “significant slowdown” could be witnessed in 4Q2011. The airline industry lost the equivalent of two years of growth during the last financial crisis, based on historical trends, and while leisure traffic has returned, the level of more profitable premium business remains below the pre-recession peak.

Premium traffic growth rates to moderate but upward growth trend still exists: IATA

Worldwide premium air travel demand growth eased in June, reflecting slower world trade demand and weakening business confidence, according to airline industry association, IATA. Since these figures were assembled, global financial markets have experienced significant volatility and uncertainty, though IATA remains reasonably positive about airline prospects. It noted that premium passenger markets are expected to show further growth over the months ahead. But it warned that growth rates are likely to “run at a slower pace”.

Premium traffic improves but outlook less than clear: IATA

Global premium travel rose 9.5% year-on-year in May-2011, but concern about slowing economic activity in key premium travel markets in North America and Europe, combined with a steady deterioration in business confidence, leave reason for caution. IATA has warned that the latest monthly growth may be exaggerating the underlying rate of growth and a significant fall-back to lower rates could bee seen in the Jun-2011 data.

Qantas needs to fix its international woes

Qantas has provided a revised outlook for FY2010/2011 (ending 30-Jun-2011) of an underlying profit before tax (PBT) in the range of AUD500 million to AUD550 million. It is a wide range for a period that ends in just over a week, but reflects the challenges the group is currently facing with the Chilean volcano, which "remains a material variable" to the final result.

Premium demand to remain ‘soft’ in coming months: IATA

IATA expects premium travel demand to remain “soft” over the next few months with fuel costs continuing to weigh on economy travel. Premium travel numbers in Apr-2011 continued to be affected by recent shocks to demand in Asia and MENA, with a stronger second half being dependent on economic growth holding up, IATA said.

Air travel growth slows in Mar-2011 with 2Q likely to remain depressed; 2H rebound likely: IATA

Growth in international air travel slowed in Mar-2011 as the Japanese earthquake and political turmoil in the Middle East and North Africa stalled the previously strong growth in air travel on international markets, IATA said. The Association warned that the second quarter would likely see “continued depressed air travel markets” due to these events.

Premium traffic growth slows on high fuel prices and Middle East unrest: IATA

IATA cautioned that the next few months at least would see air travel “adversely” hit by external factors, such as a further surge in fuel prices, unrest in MENA region, the impact of the Japanese earthquake and a fall in business confidence during Mar-2011. Passengers travelling on premium and economy seats continued to expand in Feb-2011, albeit at a slower pace.