Airlines are the canaries of the global economic coal mine. Looking at passenger and freight loads can give analysts a quick and easy view of business confidence. Over the past few months, confidence has been very low.
However, it appears that the aviation economy may have finally hit bottom. A report by the International Aviation Transport Association released in June claims that the decline in passenger movement has stabilized. In May, passenger load factors stood at 71.2%, a smaller dip than expected from May 2008. Decline in air cargo demand also slowed, shrinking by 17.4% in May compared with a 21.7% drop the previous month. "Since December 2008, cargo demand has been moving sideways in the -20% range," said the report. "This is one of the first physical signs of the economic recovery being anticipated in equity markets."
While this may be bottom, recovery is still a long way off. Debt and low asset prices will make for a slow recuperation.
Even so, no extraordinarily bad news is good news as far as the travel sector is concerned. In China, despite the distortions of state intervention, the market still rests on strong fundamentals. Route mileage growth remains steady, and despite a few health- and riot-induced hiccups, Chinese tourism remains on a steady positive trajectory. Domestic airlines are safe and relatively punctual.
However, the 800-pound gorilla in the room is the effect air travel has on the environment. Airplanes burn kerosene, exponentially out-polluting all other forms of transport. Should policy-makers decide to incorporate the cost of these emissions into the cost of aviation fuel, airlines will be hard-put to avoid passing the cost on to the consumer, depressing demand.