Business class travel expected to dip further in 2012: IATA

The decline in business confidence and the slowdown of world trade is likely to affect premium class air travel in the coming months, the International Air Transport Association (IATA) has said.

“After signs of faster growth in the first half of this year, the expansion in premium travel has now clearly flattened out,” IATA’s assessment of premium and economy travel in July has found.

The growth in world trade has also slowed, with declines in both European imports and exports standing out in the second quarter. Business confidence has reversed the upward movement seen earlier in the year, declining for the past four months, the world airline body said.

The number of passengers buying business class or first class seats on international markets has shrunk by 0.5 per cent in July compared to the same month last year, after registering an increase by 4.3 per cent in June.

But the number of economy class fliers increased by three per cent in July compared to a year ago, but it was down from 6.2 per cent as compared to the growth in June.

“These growth rates, however, were likely affected by the start of Ramadan in late July, which commenced a month earlier than in 2011. We expect air travel growth would have been about a percentage point higher in July without the impact of the holiday,” IATA said.

The primary source of slowing growth trend was the weakness in European markets. The trend seen over the last several months continued in July, with premium travel within Europe and across the North Atlantic showing persisting weakness, contracting 3.5 per cent and 2.4 per cent compared to a year ago, respectively.

Air travel markets elsewhere expanded overall, but there was slower growth on some routes in July compared to June.

The weight of the economic problems in Europe has started to dampen demand in other regions, with US and Chinese consumer confidence weakening in recent months.

Premium travel across the North and mid-Pacific, which had been averaging near double-digit growth throughout the first half of 2012, increased just 2.9 per cent in July.

“There is also a possibility, given the early signs of softness in July on some routes, that the weakness in Europe could spread to other markets,” IATA said.

The slowdown in premium travel growth was largely the result of weakening demand on routes linked to Europe.

Economic conditions in the continent were not lending support to travel markets, with both business and consumer confidence continuing to decline, IATA results said.

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