2 Premium Traffic Monitor December 2013
World trade is a good proxy for business travel not only because of the link to manufacturing activity, but also because it is associated with international industries like banking and consultancy. World trade growth has been relatively flat since early 2012, which has placed downward pressure on growth in premium travel. During recent months, there have been some signs of improvement in trade growth in regions like Europe, the US, and Asia. This has helped support the stronger growth we are seeing in business-related premium travel over recent months. But beyond the cyclical improvement in the global economy and world trade growth, recent developments show that increases in protectionist measures have resulted in a similar pace of trade expansion as domestic industrial production. Previously, trade expanded at twice the pace of domestic growth. If this past relationship is not restored, rates of expansion in trade could be limited, as could growth in business-related air travel.
Business confidence has been steady over recent months, but remains at highs not seen since Q1 2011, which should sustain growth in premium travel. The second chart below shows business confidence (measured here by the JP Morgan/Markit
purchasing managers’ index)
, and its steady, continued increases throughout the second half of 2013. The improvement reflects better performance of advanced economies, and more recently a pick-up in emerging Asia.
Financial market sentiment can also provide an indication of the state of the global economy, and demand for business related travel. The third chart below shows the MSCI World share price index and its movement relative to premium travel growth. The share price index tends to lead changes in premium travel demand by several
months, as fluctuations in companies’ financial performance take time to
affect business travel plans. Current financial market performance, as indicated by the MSCI World share price index, shows a fall in share values in the New Year. Much of the decline is due to the emerging market asset sell-off as the US tapers its quantitative easing program. The full impacts on businesses and economic activity is yet to be seen, and as a result the affect it could have on business-related premium travel is not yet clear.
% c h a n g e o v e r y e a r
Premium passengers and world trade growth
Premium Travel GrowthWorld Trade in Goods Growth
Source:Netherlands CPB, IATA
C o n f i d e n c e I n d e x % C h a n g e o v e r Y e a r
Premium Travel and Business Confidence
Source: IATA, Markit/JP Morgan
Premiux PaxPMI Index (manufacturing)
P r e m i u m P a x , Y o Y % g r o w t h M S C I W o r l d i n d e x , Y o Y % g r o w t h
Premium Traffic and Global Financial Market PerformanceSource: IATA, ThomsonReuters
MSCI World IndexPremium Traffic Growth
First / BusinessEconomyTotal
Traffic Growth by Route -December 2013
Within EuropeNorth AtlanticWithin Far EastEurope-Far EastNorth and Mid Pacific
% G r o w t h , Y e a r - o n - Y e a r