The International Air Transport Association (IATA)  has reported that full year 2011 passenger demand rose by 5.9% compared to 2010 in line with long-term growth trends.

In contrast, cargo markets contracted by 0.7% for the year but recorded positive demand growth  of 0.2% in December.

Growth in demand lagged capacity increases at 6.3% (passenger) and 4.1% (cargo) putting downward pressure on load factors.

The average passenger load factor for 2011 was 78.1%, down from 78.3% in 2010, while the freight load factor was just 45.9%, down from 48.1% in 2010.

Tony Tyler, IATA’s Director-General said; “Given the weak conditions in Western economies, the passenger market held up well in 2011.

But overall, 2011 was a year of contrasts. Healthy passenger growth, primarily in the first half of the year, was offset by a declining cargo market. Optimism in China contrasted with gloom in Europe. Ironically, the weak euro supported business travel demand. But Europe’s primary tax and restrictive approach to aviation policy left the continent’s carriers with the weakest profitability among the industry’s major regions. Cautious improving business confidence is good news. But 2012 is still going to be a tough year”.

While passengers’ demand for December rose 5.4% compared to the same month in 2010, the trend since mid-year has clearly slowed, as travel markets react with a lag to the declines in confidence that weakened cargo in the second half of 2011.

Comparisons with December 2010 are also distorted as severe winter weather in Europe and North America as well as strikes in Europe suppressed demand. December 2011, passengers’ demand was up just by 0.7% over November while the load factor declined 0.2 percentage points just as freight capacity climbed 4.4% in December compared to December 2010. The freight load factor was just 46.1% for the month.

On the international passenger markets, International air travel rose 6.9% last year, though the majority of this growth occurred in the first half of the year.

 International capacity climbed 8.2%, pushing the passenger load factor down to 77.4%. For December, international traffic climbed 6.4% year over year, in part, owing to depressed traffic levels in 2010 in North American and Europe, and rose 1.4% compared to November.

European carriers posted the second highest growth rates, behind Latin American carriers. Demand rose 9.5% last year while capacity climbed 10.2%, resulting in a load factor of 78.9%. December traffic rose 9.8% but this was surpassed by a 10.3% rise in capacity.

Europe’s strong performance is somewhat surprising in light of the European sovereign debt crisis; however, European airlines have benefited from robust business travel on long-haul markets, partly due to strong exports from Northern Europe.

African airlines saw travel demand fall 0.7% for December, but it rose 2.3% for the full year. This relatively weak performance was in part owing to the civil unrest in a number of North African countries.

However, good economic performance in the region was also generating significant demand for air travel.

While African airlines were unable to fully benefit and their low growth represents a loss of market share, capacity climbed just 0.2% for December and 4.4% for the 12 months while load factors were the weakest in the industry at 68.9% for December and 67.2% for the full year.

Passenger demand in domestic markets for the full year rose by 4.2% compared to a 3.1% rise in capacity, leading to a load factor of 79.3%. December demand rose 3.7% from a year earlier, however, this represented a 0.5% decline from November. It is not clear yet whether this signals a new trend or is just an anomaly. Individual markets varied dramatically in their performance.

Speaking on the bottom  Line, the IATA director general said: “Improving business confidence and encouraging news from the US economy are heartening developments. But it is far too early to start predicting a soft landing for 2012. The euro zone crisis is far from over. Failure to achieve a durable solution will have dire consequences for economies around the world. And it would most certainly tip the airline industry into the red.

“Airlines have made massive investments in new fuel-efficient, environmentally friendly aircraft. The challenge is to deploy them profitably into a dynamic and uncertain market. Governments, meanwhile, need to take a strategic view of the airline industry that recognizes its value as a catalyst for economic growth. Airlines transport about 3 billion people a year. And over a third of the value of goods that are traded internationally is transported by air.