Strong demand growth in aviation sector resumes in June

International Air Transport Association (IATA) announced global passenger traffic data for June showing that demand (measured in total revenue passenger kilometers or RPKs) rose by 7.8 per cent compared to the year-ago period.
 
This was in line with the 7.7 per cent growth recorded in May. All regions reported growth. June capacity (available seat kilometers or ASKs) increased by 6.5 per cent, and load factor rose 1.0 percentage point to 81.9 per cent.

For the first six months of 2017, the industry experienced a 12-year high in traffic growth (7.9 per cent) and a record first half load factor of 80.7 per cent.

“A brighter economic picture and lower airfares are keeping demand for travel strong. But as costs rise, this stimulus of lower fares is likely to fade. And uncertainties such as Brexit need to be watched carefully. Nonetheless, we still expect 2017 to see above-trend growth,” IATA’s Director General and CEO, Mr Alexandre de Juniac said.

International passenger markets

June international passenger demand rose 7.5 per cent compared to June 2016. All regions recorded growth, led by airlines in Africa. Capacity climbed 6.2 per cent, and load factor climbed 1.0 percentage point to 80.6 per cent.

•    Asia-Pacific airlines’ June traffic jumped 9.1 per cent compared to the year-ago period. Capacity rose 7.9 per cent and load factor edged up 0.9 percentage points to 79.3 per cent. The overall upward trend in seasonally-adjusted traffic remains strong, although volumes have slipped in recent months. Traffic on Asia-Europe routes continues to trend upwards following terrorism related disruptions in early 2016. However, solid demand growth on international routes within Asia has paused.

• European carriers saw traffic rise 8.8 per cent in June compared to June 2016, which was up from a 7.5 per cent year-over-year increase recorded in May. Capacity climbed 6.5 per cent and load factor rose 1.8 per cent percentage points to 85.9 per cent, highest among the regions. The stronger growth reflects both a favorable comparison with the year-ago period, as well as increased momentum in the regional economic backdrop.

• Middle Eastern carriers posted a 2.5 per cent traffic increase in June, which was a slowdown from the already subdued 3.7 per cent growth seen in May. Capacity rose 3.1 per cent, and load factor slipped down 0.4 percentage points to 68.9 per cent. While most markets have seen demand slowing, it is most visible on the Middle East-North America market, which has been affected by a combination of factors including the (recently-lifted) ban on personal electronic devices, as well as a wider negative stimulation from the travel ban that has now been implemented for certain countries. However, passenger traffic between the Middle East and North America was already slowing in early 2017, in line with a moderation in the pace of growth of the largest carriers in the region.

• North American airlines’ demand rose 4.4 per cent compared to June a year ago. Capacity climbed 4.1 per cent, with load factor inching up 0.3 percentage points to 84.5 per cent. The comparatively robust economic backdrop in North America is expected to continue to support outbound passenger demand. However, anecdotal evidence suggests that inbound tourism is being deterred by the additional security measures in place for travel to the US.

• Latin American airlines experienced a 9.7 per cent rise in demand compared to the same month last year supported by strong travel within the region, while travel to North America is flat to down slightly. Capacity increased by 9.1 per cent and load factor rose 0.4 percentage points to 82.1 per cent.

• African airlines’ traffic soared 9.9 per cent in June. Capacity rose 7.1 per cent, and load factor jumped 1.7 percentage points to 64.3 per cent, although this still was the lowest among regions. Conditions in the region’s two largest economies have continued to diverge, with business confidence in Nigeria rising sharply in recent months, while South Africa’s economy fell into recession in the first quarter.

Domestic passenger markets

Demand for domestic travel climbed 8.2 per cent in June compared to June 2016, up slightly from the 7.9 per cent growth seen in May. June capacity increased 7.0 per cent, and load factor rose 0.9 percentage points to 84.3 per cent. Led by China and India, all markets reported demand increases, but with wide variation.

• India led all markets with a 20.3 per cent rise in domestic traffic in June. However, the very strong upward trend in traffic has slowed since the country’s unexpected ‘demonetization’ in November 2016. India’s streak of year-on-year double-digit traffic growth may have ended with June.

• China’s domestic traffic surged 17.6 per cent in June, which was ahead of the first half growth rate of 15.2 per cent. There continues to be little sign of any slowdown in the traffic trend and second quarter GDP figures were stronger than expected. Air travel demand is continuing to be stimulated by supply factors, including ongoing growth in the number of unique airport-pair routes served, which ultimately translates into time savings for passengers.