This month focuses on those markets that continue to perform less strongly than those familiar headline high-growth markets.  It is clear that a continuing weak economy, airline consolidation, high fuel prices and fragile yields makes it difficult for airlines to invest new capacity in some markets.  There are a number of markets, routes and airports that are suffering declines and the reasons behind them vary considerably.

The global growth in scheduled airline seats for December 2011 is 3%.  As usual, Asia and China capacity in particular are high growth markets for airline capacity investment.  However, there are a number of markets that act as a drag on growth.  These low growth markets have experienced a decline over the medium term and are not a product of the past 12 – 24 months.

The US domestic market is perhaps the largest global market that is suffering from capacity reductions.

The decline in the US domestic market can be traced back to December 2004, with brief and shallow growth between 2006 and 2007.  The small growth in 2010 seems to have not been sustainable.  Average seats per aircraft in this market has risen slightly, from 93 in 2002 to 96 in 2011.

More interesting is the rapid decline in US domestic capacity as a share of global activity.  Alongside the decline in the US market has been a rapid growth in markets from China to Brazil, as well as the growth of the low-cost sector.  Both the rise of non-US markets and the increase in high-growth markets has driven the US domestic share from 32% to 21% in 9 years.  Growth in the US market has slowed down its rate of decline, but has not halted the fall.

The Intra-European Union market is slightly smaller than the US Domestic market in terms of monthly seats.  The Intra-EU trend has been for small increases in capacity.  Stoked largely by low cost expansion, the EU capacity has managed to maintain a growth profile until December 2008.  Capacity has remained flat since then, with 2011 showing a decline of -4% (one of the largest regional market declines for December 2011).

After a period of rising global capacity share, intra-EU capacity has ended up in December 2011 slightly lower than where it started in December 2002, at around 14%.  Competition by surface transport and almost no growth by the legacy carriers on their intra-EU network indicate that this is a mature market for airline competition.

As a comparison, the Intra-Asia/Pacific market continues to maintain a clear trend line.  The global financial crisis slowed growth slightly but only in 2008 and is barely visible on the trend line.  Capacity then followed a similar trajectory to that between 2002 and 2006.

Intra-Asia’s market share of global capacity has consistently risen from 23.5% in December 2002 to over 31% in December 2011.  Intra-Asian capacity has therefore risen from just under a quarter of global capacity, to almost a third in 10 years.

One area of rapid growth, particularly for low cost airlines was North Africa.  A wave of liberalisation and third party airline investment made North Africa an appealing LCC base.  It had the right mix of tourist appeal and a diaspora wanting to visit home more regularly.  However, the recent political and social events across the Maghreb have impacted considerably on this market sector.

Low cost capacity started to register in 2004 and has grown exponentially ever since.  To/From North Africa has now experienced a decline of 20% between December 2010 and December 2011.  The intra-North African market is much less established by this sector, but has also experienced a much greater decline of 58% on seat capacity.

National carriers and many visiting airlines had maintained their operations to most North African countries, cancelling only when the disruptions became too risky to be continued.  Therefore, the decline in total annual capacity to/From North African destinations shows only a 1% fall in seats offered.

The intra-North African markets have shown no growth for ten years, whilst capacity to/from the region has consistently risen, more than doubling the capacity to the region in ten years.  Capacity within North Africa has added only 173,000 annual seats in that ten year period.

There is a cluster of seven routes that have experienced high declines in capacity for December 2011.  Of the seven routes, four have experienced high growth over ten years, and the declines are experienced for the first time in 2011.  The remaining three routes are stagnant, mature markets that struggle to warrant capacity expansion.  The Tokyo (NRT) market to the US and Canada shows signs of being in terminal decline.  This may be because of a lack of new traffic, competing options to link the two markets or the trade links between the two countries have weakened and moved elsewhere.

It is surprising to note the decline in capacity for December has declined between London and the Middle East.  Frankfurt to Asia/Pacific also appears to have plateau-ed, though it is likely that the market is also being funnelled through Munich Airport, too.  However, Munich Airport has not closed the gap on Frankfurt, with a relatively similar trend for the two airports over the last ten years.

The gentle decline in capacity at Atlanta and the rapid capacity expansion at Beijing indicates that the World’s largest airport will be Beijing in 2012.  Figures for capacity in December 2011 show that there are only 400,000 monthly seats separating the two global giants.

US secondary hubs have always struggled to maintain a rationale within the network.  Airline consolidation inevitably imposes a consolidation on duplicate hubs.  The Delta/Northwest merger has resulted in two hubs, Memphis and Cincinnati suffering from capacity reductions.  This has been a relatively long term process as airlines have downgraded from mainline to regional carriers and have cut the number of connecting waves at secondary hubs.

Memphis has experienced a 46% decrease in capacity over the past ten years.  Cincinnati’s decline is far steeper, falling from almost 3 million seats in December 2002, to almost 700,000 seats in December 2011.  At the same time, the Salt Lake City hub has effectively remained unchanged (though it has lost 325,000 monthly seats over the ten year period).

OAG FACTS uses interactive graphs to display a 10-year visual trend of the performance of a specific airport, route, country or region. It is updated monthly.

Printer friendly version:   OAG FACTS Executive Summary December 2011