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Middle east leads the way

Slower but more profitable growth for aviation industry in 2006

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. Average…

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. 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 passenger recording full-year growth of 15.4%.

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% 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.

December 2006 over December 2005 RPK Growth ASK Growth PLF
Africa 9.9% 8.1% 68.0
Asia/Pacific 6.5% 3.7% 74.9
Europe 5.8% 4.5% 74.5
Latin America -3.2% -3.1% 72.7
Middle East 18.1% 20.2% 74.4
North America 6.6% 5.9% 78.4
Industry 6.9% 5.5% 75.0

Vicky Karantzavelou
Co-Founder & Chief Editor - TravelDailyNews Media Network | + Articles

Vicky is the co-founder of TravelDailyNews Media Network where she is the Editor-in Chief. She is also responsible for the daily operation and the financial policy. She holds a Bachelor's degree in Tourism Business Administration from the Technical University of Athens and a Master in Business Administration (MBA) from the University of Wales. She has many years of both academic and industrial experience within the travel industry. She has written/edited numerous articles in various tourism magazines.

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