IATA's November premium traffic monitor shows traffic growth for Middle East

IATA has releases its latest Premium Traffic Monitor for November 2014 revealing continued robust economic performance for Middle East region.
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Key points in the report:

Q Growth in international air passengers rose 3.6% in November compared to a year ago, showing no improvement on October’s performance (a 3.7% increase). Consistent with weakening global business conditions, these results suggest that growth in international air travel is stalling;
Q International air travel volumes, as shown in the first chart below, indicate a flattening in the growth trend in both economy and premium passenger numbers over the recent past. This development reflects a gradual slowdown in improvements in business confidence throughout H2 2014, with economic conditions in the Eurozone and China deteriorating;
Q Stronger growth in total international travel was inhibited by other markets where expansion remained robust but below trend. Examples include international travel on Europe – Far East, Europe – Middle East and Middle East – Far East.
Q Growth in international air passengers rose 3.6% in November compared to a year ago, showing no improvement on October’s performance (a 3.7% increase). Looking at international air passenger volumes (first chart above) reveals a flattening in the growth trend in both economy and premium passenger numbers over the recent past. There were signs of stronger growth earlier in Q3, after a period of notable weakness mid-year, but that positive momentum has slowed again. Although the global economy continues to expand, latest data show a widespread slowdown in key economies at the start of Q4. The US economy appears to be set for steady growth, but at a slower pace in Q4 than was seen in earlier months, according to Markit’s indicators of business activity. Industrial production in the Eurozone and China are pointing towards deterioration in those economies.

Traffic growth by major route


Q Growth on longer-haul markets remains robust, but performance in November showed signs of weakness compared to prior months. Examples include international travel on Europe – Far East (up 2.5% in November compared to 4.6% year-to-date), Europe – Middle East (up 6.5% in November compared to 7.5% year-to-date) and Middle East – Far East (up 7.3% compared to 9.2% year-to-date). It is important to note, however, that growth in premium travel on these markets was above trend in November, which is a good sign for yields on these routes. The slowdown in growth overall is reflecting frailty in economic performance in Europe and Asia, rather than the Middle East, for example. Major economies in the Middle East, including Saudi Arabia and the United Arab Emirates, continue to show robust economic performance. Markit measures of business activity (both manufacturing and services) show sustained economic growth ahead, with the latest whole economy PMI for the United Arab Emirates surging strongly at the start of Q4 to reach the highest level since the Indices’ creation (2008).

2 Premium Traffic Monitor


Q Travel on premium seats rose 2.2% in November compared to a year ago, which is a slowdown on the October rise of 2.8%. But this reduction in year-on-year growth rates was the effect of a strong monthly increase in November 2013. When we look at international premium travel volumes (first chart above) we see that there was a small increase in November compared to October – not enough to break the flat trend seen over recent months, but enough to sustain premium’s share of total travel (second chart above). In 2013 and during earlier parts of 2014 premium travel was expanding at a faster pace than economy travel, which was providing a boost to the share of premium travel from total travel. This was positive for yields growth and revenues. That trend was reversing over recent months, but the November result (with a small expansion in premium volumes compared to a slight contraction in economy seats) helped premium’s share of total travel edge closer to 6%.
Q The profile of air travel growth, with a strong second half in 2013 and relatively slower growth during the earlier months of 2014, has been driven by wider economic developments. World trade and industrial production accelerated during the second half of 2013, but that trend failed to continue in 2014, with growth slowing for both measures in Q1. Over the course of more recent months, however, there has been another pick-up in world trade activity, mainly in Emerging Asia.
Q But the outlook for world trade activity contains some downside risks. Business confidence, a good leading indicator of trade activity and demand for business-related air travel, has not seen any improvement since mid-2014. In fact, there has been a gradual easing in business confidence over the past 6 months.
Q With respect to air travel growth, the outlook for international air travel remains positive overall, but further acceleration – particularly on some markets – is now unlikely.