IATA: Premium traffic growing steadily but yields way down

IATA reported that the number of premium passengers on international flights grew 5.5% in January, the second straight month of gains following 18 consecutive months of declines.

In its latest "Premium Traffic Monitor" released yesterday, the organization said the extreme drop in premium passengers that began in mid-2008 now appears to have been "a very large cyclical fall" rather than a structural shift, but warned that yields on premium traffic are still very low.

Regarding traffic, there is still a lot of catching up to do but no reason to think premium passengers won't continue returning, IATA said. "Such was the earlier decline [that premium traffic] remains over 16% below its previous peak. A robust rise in world trade seems to be driving the upturn in premium passengers. . .It now looks as though the recession in premium travel has been cyclical rather than a permanent fall."

It added, "World trade started to pick up at a robust pace from the middle of last year. Premium passenger numbers followed that upturn very closely. At the moment there is no reason to expect this trade upturn to stop so further gains in. . .premium travel are likely in the months ahead."

It cautioned, however, that "what matters for the bottom line is not passenger numbers but revenue. . .Even though premium revenues are up 20% from their low and showing positive year-on-year growth rates again, there is a further 30% to be regained before early 2008 premium revenue levels are reached." In contrast, economy revenue is now just 7% below its previous peak, it noted.

The comeback in premium travel is strongest in Asia and South America, mirroring air transport's faster pace of rebound in those regions (ATWOnline, March 12). IATA said North Atlantic markets "remain sluggish." It also noted that "there has been a steady and structural shift of business travelers from premium to economy seats on the within-Europe market," particularly on shorter-haul routes.