IATA's latest Premium Traffic Monitor reports that business and first-class traffic fell in March, the largest drop in five years. Also of concern is that economy travel has slowed sharply. Unadjusted numbers show a 3.9 percent fall in March, following 5.1 percent growth in February. February growth was boosted by leap-year while March business travel was depressed by early Easter. Even after that adjustment, however, premium travel declined 1 to 2 percent in March. This passenger data is weaker than the passenger-kilometer data, which showed a slowdown to less than 4 percent in March. This is because the longer-haul markets are holding up better than short haul, so revenues have not slowed as fast as passenger numbers.
Nevertheless, the drop in premium passenger numbers in the same month fuel prices have risen 170 percent to $130 a barrel is bad news for airline profits. It is the first absolute decline of this size seen since 2003 but continuing the deterioration in this important market that began late last year, reflecting the sharp slowdown in financial sector activity and the U.S. economy. Premium traffic shrank 3.9 percent in March after having grown 5.1 percent in February. But this decline was exaggerated by the leap year adding an extra day and an additional 3 to 4 percent points to February growth, while March business travel was depressed by the early Easter. Adjusting for these distortions shows a slowdown from 1-2 percent growth to a fall in passenger numbers of 1 to 2 percent in March.
In February there was a similar upward distortion in both premium and economy passenger numbers, as an extra Friday was added to the month by the leap-year. However, in March the early Easter reduced business travel but boosted leisure travel and visiting friends and family. Previous years when this has occurred have seen premium travel fall 2 to 3 percent from trend before rebound a similar amount the following month, whereas economy travel has risen 3 to 4 percent from trend before falling back. The unadjusted data shows premium travel apparently collapsing having grown 5.1 percent in February then falling -3.9 percent in March this year. The underlying slowdown was less dramatic; growth of 1-2 percent in February to a decline of 1-2 percent in March. Nonetheless, this highly cyclical premium market has clearly slowed sharply and is now shrinking. By contrast economy class is weaker than the headline figures suggest with an underlying slowdown from 4 to 5 percent in February to 1 percent in March.
