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Business Taking Flight: What Is Current Air Traffic Telling Us About the Economy?

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I'm just back from my first international business trip of the year, a whirlwind three-city tour of Mexico. I spend a lot of time in airports each year, and I'm always interested in how busy they are. After all, a busy airport and full planes should mean the economy is going well, right? Well, the airports and the airplanes looked packed to me, at all hours of the day, and on various routes. Even the front cabin was full -- those hoping for an upgrade were generally disappointed. But what do the stats say?

Analysts have wondered aloud whether travel intensity -- the number of trips relative to GDP -- is actually on a down-trend. After all, technology allows doctors to operate remotely, and enables us to do far less complex work over the wire. It makes sense that we just don't need to be on location as much as before. However, that same technology has brought far more countries into the global economic picture, increasing aggregate air travel greatly over the past two decades.

U.S. air travel statistics tell the tale. Between the late 1980s and 2000, passenger air traffic rose 64 percent. It took a beating in the security-conscious post-9/11 period, but between 2003 and 2007, it soared 19 percent. It swooned again with the global financial and economic crisis, and has struggled to get back up to previous peak levels. Domestic travel has been weakest; international travel has actually recovered nicely, and thanks to robust Latin America travel, continues to scale new heights.

European data show the same trends, although the impacts of 9/11 and the global recession have not been as severe. Data on emerging market traffic are more sparse, but where available speak of the explosive growth in business activity in recent years. Taken together, recent trends give a decent picture of the industry. But can we learn anything from more recent movements in air traffic?

Data from the IATA show that revenue passenger kilometers in North America track the recent ups-and-downs of the economy. As of November, year-to-year passenger travel was up 2.6 percent after flat performance in the previous four months. European travel was a bit better, up 4 percent for the same period, but that was down from recent months, reflecting Europe's recessionary conditions. Compared with figures in the rest of the world, these stats are modest, reflecting a combination of one-off economic interruptions and key structural business impediments in OECD countries.

It comes as no surprise that emerging market data are much more impressive. Taking up the rear is Asia, up just 6.2 percent over last year's passenger traffic, likely weighed down by Japanese activity. Closer to home, Latin American flights are up an impressive 11 percent as of last November. At the same time, Middle East traffic was up 10.5 percent, but has consistently been the strongest global market in the post-recession period. In these vibrant markets, it is still best to book early.

Traffic is one thing, but fuller planes also indicate greater air-carrier efficiency. Load factors -- the ratio of passengers to available seats -- have risen consistently over the past decades. From just over 60 percent in the late 1980s, U.S. load factors have risen to 83 percent. International load factors are similar. Higher load factors and rising overall activity are a double dose of good news for air carriers.

The bottom line? If air traffic is any guide, economic activity seems to be picking up in the New Year. Get your cabin baggage in early, expect someone in the middle seat, and don't delay requesting the upgrade. But it's not just full planes -- expect full airports too -- and more so, as the year goes on.