Summary:
- Latest IATA performance metrics show global passenger demand grew +6.1% in May-2018, a small increase on last month. Capacity climbed +5.9% and industry load factor rose 0.1 percentage point to 80.1%;
- Domestic demand rose +6.6% in May-2018, while international demand grew +5.8% delivering average monthly loads of 82.6% and 78.7% respectively;
- Air freight recorded strong demand (+4.2%) and capacity (+6.2%) growth as capacity growth outstripped demand growth for the fourth month in a row;
- All regions reported monthly growth on 2017 freight levels in May-2018, albeit at different levels of expansion. Latin America remains the standout market with another double-digit rise.
In the passenger market global passenger traffic demand (measured in revenue passenger kilometres, or RPKs) rose +6.1% compared to May-2017, which was a small increase on Apr-2018 (+6.0%), but down from the 12-month high of +9.7% in Mar-2018, a figure influenced by the timing of Easter. May-2018 capacity (available seat kilometres or ASKs) increased by +5.9% for a second consecutive month, and load factor climbed 0.1 percentage point to 80.1%.
IATA describes May-2018 as "another solid month in terms of demand growth" albeit with some moderation, as rising airline costs reduce the stimulus from lower airfares.
Demand for domestic travel climbed +6.6% in May-2018 compared to last year, once again led by growth in China and India. This was down from the +8.6% year-on-year growth recorded in Apr-2018 largely owing to moderate growth in both countries, although each continued to post double-digit traffic gains. India recorded a 45th consecutive month of double-digit growth at +16.6%, while China's growth was +11.9%.
Domestic capacity increased at a faster rate to demand +6.7%, and therefore load factor slipped slightly by 0.1 percentage point year-on-year to 82.6%. All markets reported demand increases with stand out performers also including the United States of America where domestic traffic increased +5.5% year-on-year - up from +5.3% last month. Domestic traffic in the US is trending upward at an annualised rate of around +7%, says IATA, helped by the comparatively strong local economy.
During the month international passenger demand rose +5.8% compared to May-2017, up from the +4.6% growth recorded in Apr-2018. All regions recorded year-over-year traffic increases. Total capacity climbed +5.4%, and load factor rising 0.3 percentage points to 78.7%.
Looking at international performance from a regional perspective...
- Asia-Pacific airlines saw their traffic rise +8.0% in May-2018 compared to the year-ago period. Capacity increased +7.6%, and load factor edged up +0.3 percentages point to 77.9%.
- European carriers' May-2018 demand climbed +6.2% over May-2017, well above the rate recorded in Apr-2018. Capacity rose +5.1% and load factor was up +0.8 percentage point to 83.5%, which was the highest among regions.
- Middle East carriers' May-2018 demand growth slowed to +0.8% compared to a year ago, from +2.9% annual growth recorded in April, although the timing of Ramadan may have affected the result. Capacity increased +3.7%, and load factor fell -1.9 percentage points to 67.5%.
- North American airlines' traffic rose +4.9% in May-2018 compared to May-2017, a strong rebound from +0.9% annual growth in Apr-2018 (a 36-month low). Capacity climbed +3.4% and load factor increased +1.2 percentage points to 82.0%.
- Latin American airlines experienced a +7.5% increase in traffic in May-2018 compared to the same month last year. Capacity climbed +7.0% and load factor rose +0.4 percentage points to 81.6%.
- African airlines' traffic rose +3.8% in May-2018 compared to the year-ago period, which was an eight-month low. Capacity rose +3.2% and load factor edged up +0.4 percentage points to 66.4%.
"This is a solid performance," says Alexandre de Juniac, director general and CEO, IATA. But, he acknowledges the airline sector's buffer against shocks is just USD7.76. "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," he adds.
Air freight growth set to continue, but at a slower pace
IATA reports that global air freight demand, measured in freight tonne kilometres (FTKs), rose +4.2% in May-2018, compared to last year. This is down a fifth on the +5.2% (revised from +4.1%) growth in annual demand recorded in Apr-2018. Freight capacity, measured in available freight tonne kilometres (AFTKs), grew by +6.2% year-on-year, the fourth month in a row that capacity growth outstripped demand growth.
[perfectpullquote align="left" cite="" link="" color="" class="" size=""]
"Headwinds are strengthening with growing friction among governments on trade. Experience tells us that trade wars, in the long run, only produce losers."
Alexandre de Juniac, Director General and CEO, IATA[/perfectpullquote]
After a weak start to 2018, demand for global air freight has now resumed a modest trend upwards. However, IATA says the latest data reinforces that the rapid growth seen in 2017 is clearly now over, with demand growing at a significantly slower pace in 2018. In IATA's mid-year industry outlook, 2018 freight growth was revised downwards to +4.0% (from the previously forecast +4.5% in Dec-2017).
IATA says that indicators such as the end of the re-stocking cycle and the export orders component of the global manufacturing Purchasing Managers' Index (PMI) hitting a 21- month low, together with the fact that global trade appears to be softening as trade tensions increase, show that growth is expected to continue at a slower pace:
"We expect air cargo demand to grow by a modest 4.0% in 2018. That's an uptick from a very weak start to the year. But headwinds are strengthening with growing friction among governments on trade," says Mr de Juniac, but he warns that while demand will still grow, expectations will be dampened with each new tariff introduced. "Experience tells us that trade wars, in the long run, only produce losers," he added.
All regions reported growth on May- 2017 freight levels, albeit at different rates of expansion. Asia-Pacific carriers reported FTK growth of +4.9%, Middle East carriers saw growth of +2.4%, European airlines FTKs rose +2.3%, African carriers saw an FTK increase of +2.0%, while North American carriers' freight volumes expanded +5.9% compared to the same period a year ago. The Latin American carriers' performance was again the clear standout with growth of +11.4% in May-2018 - the largest increase of any region for the third consecutive month - as freight volumes in the region continue to recover.