INTERNATIONAL. There has been a robust rise in air traffic demand (measured in revenue passenger kilometres, or RPKs) of +6.1% in May, compared to the same month in 2017. That’s according to new International Air Transport Association (IATA) data.
Capacity also climbed +5.9% and load factor rose 0.1 percentage point to 80.1%.
“May was another solid month in terms of demand growth,” said IATA Director General and CEO Alexandre de Juniac. “As had been expected, we saw some moderation, as rising airline costs are reducing the stimulus from lower airfares. In particular, jet fuel prices are expected to be up nearly +26% this year compared to 2017. Nevertheless, the record load factor for the month signifies that demand for air connectivity is strong.”
By region, the largest growth was from Asia Pacific at +8.7%, with some weakness seen in the Middle East (+0.5%) and Africa (-0.8%). Other regions were roughly in line with the global average (see chart below).
International and domestic regional trends
International passenger demand rose +5.8%, up from +4.6% growth in April. All regions recorded growth, led by Asia Pacific airlines (+8.0%). Following were Latin American carriers (+7.5%), Europe (+6.2%), North America (+4.9%), Africa (+3.8%) and the Middle East trailing at +0.8%.
Total capacity climbed +5.4%, with load factor rising by 0.3 of a percentage point to 78.7%.
Domestic demand rose +6.6% in May compared to May 2017, led by growth in China and India. This was down from the +8.6% year-on-year growth recorded in April. IATA largely attributed this to moderate growth in both countries, although each continued to post double-digit traffic gains.
India’s underlying strength
India’s domestic traffic rose +16.6% year-on-year, down from +25.7% in April. Volumes fell in seasonally-adjusted terms possibly due to mixed signals on the economy. Nevertheless, May was India’s 45th consecutive month of double-digit annual RPK growth.
Demand continues to be supported by a strong increase in the number of airport connections within the country – some 22% more airport pairs are scheduled to operate in 2018 compared to last year.
US domestic traffic experienced a very mild pick-up in May, with +5.5% year-on-year traffic growth, up from +5.3% in April. This partly offset the moderate growth in China and India. Domestic traffic is trending upward at an annualised rate of around +7%, helped by the comparatively strong US economy, said IATA.
A cautionary word
Last month in IATA’s mid-year economic report, the organisation said it expected an industry net profit of US$33.8 billion, which is a good performance. But context is everything.
De Juniac noted: “Our buffer against shocks is just US$7.76. That’s the average profit per passenger that airlines will make this year—a narrow 4.1% net margin. And there are storm clouds on the horizon, including rising cost inputs, growing protectionist sentiment and the risk of trade wars, as well as geopolitical tensions.”
