Latest monthly metrics from the International Air Transport Association (IATA) for the global passenger and cargo airline market shows a mixed month of performance from the two sectors. The data for Jun-2018 shows the rate of passenger demand growing and load factor increasing, while cargo demand continues to slow,continuing a trend that began earlier in 2018.
- Latest IATA performance metrics show global passenger demand grew +7.8% in Jun-2018, up on last couple of months. Capacity climbed +6.5% and industry load factor rose +1.0 percentage point to 82.8%;
- Domestic demand rose +7.9% in May-2018, while international demand grew +7.7% delivering average monthly loads of 84.5% and 81.9% respectively;
- Air freight recorded slowing demand (+2.7%) and capacity (+4.1%) growth as capacity growth outstripped demand growth for another month;
- All regions with the exception of Africa reported monthly growth on 2018 freight levels in Jun-2018. Latin America remains the best performing market.
In the passenger market global passenger traffic demand (measured in revenue passenger kilometres, or RPKs) rose +7.8% compared to Jun-2017, which was an increase on Apr-2018 and May-2018 (+6.0%), but down from the 12-month high of +9.7% in Mar-2018. Jun-2018 capacity (available seat kilometres or ASKs) increased by +6.5% and load factor rose +1.0 percentage point to 82.8%. The first six months of 2018 produced demand growth of +7.0%, a strong performance, but down from +8.3% growth recorded in the first half of 2017.
Demand for domestic travel climbed +7.9% in Jun-2018 compared to last year, once again led by by double-digit gains in India (+17.6%) and China (+15.3%). All major markets reported demand increases, but with wide variation. This was up from the +6.7% annual growth seen in May. June capacity increased +7.5%, and load factor edged up +0.3 percentage point to 84.5%.
Domestic demand increased at a faster rate to capacity, +7.5%, and therefore load factor rose slightly by 0.3 percentage point year-on-year to 84.5%. All markets reported demand increases. Alongside China and India notable performers for the month comprised Brazil, where domestic traffic rose +5.3% in June, up from +3.8% in May, and Japan, where domestic traffic climbed +3.7% in June compared to a year ago, which was well up on the +1.7% growth recorded in May.
During the month international passenger demand rose +7.7% compared to Jun-2017, up from the +5.8% growth and +4.6% growth recorded in May-2018 and Apr-2018, respectively. All regions recorded year-over-year traffic increases led by airlines in the Middle East and Africa. Capacity climbed +5.9%, and load factor increased +1.4 percentage points to 81.9%.
Looking at international performance from a regional perspective…
- Asia-Pacific airlines’ June traffic rose +9.5% compared to the year-ago period, up from +7.7% growth recorded in May. Capacity rose +7.4% and load factor edged up +1.5 percentage points to 80.6%.
- Middle Eastern carriers posted an +11.0% demand increase in Jun-2018 compared to the same month last year. Capacity rose +8.0% and load factor climbed +1.9 percentage points to 71.0%.
- European carriers saw traffic rise +6.1% in Jun-2018 compared to Jun-2017, down slightly from a +6.3% year-over-year increase recorded in May. Capacity climbed +4.8% and load factor rose +1.1% percentage points to 86.8%.
- North American airlines’ demand rose +5.9% compared to June a year ago, an improvement from +5.0% growth recorded in May. Capacity climbed +3.6%, with load factor increasing +1.9 percentage points to 86.7%.
- Latin American airlines experienced a +5.6% rise in traffic compared to the same month last year. This was down from +7.9% year-over-year growth in May. Capacity increased by +6.5% and load factor slipped -0.7 percentage point to 81.4%.
- African airlines’ traffic soared +10.9% in June, up substantially from just +2.1% growth in May. Capacity rose +5.5%, and load factor jumped +3.3 percentage points to 68.0%.
“The first half of 2018 concluded with another month of above-trend demand growth, which is a good indicator for the peak summer travel season in the northern hemisphere,” says Alexandre de Juniac, director general and CEO of IATA. But, he warned that the looming prospect of a global trade war “is casting a long shadow” and rising cost inputs — fuel prices have soared by approximately 60% over the past year — “are reducing the stimulus of lower fares.”
Air freight growth continues, but the pace has slowed to year low
IATA reports that global air freight demand, measured in freight tonne kilometres (FTKs), rose +2.7% in Jun-2018, compared to last year. This continues the slowdown in air cargo growth that began earlier in 2018. Growth for the first half of 2018 stands at +4.7%, less than half the growth rate in 2017. Freight capacity, measured in available freight tonne kilometres (AFTKs), grew by +4.1% year-on-year. Capacity growth has now outstripped demand growth in every month since March.
The airline group 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. For the June data it also notes that the temporary grounding of the Nippon Cargo Airlines fleet in the second half of June exaggerated the slow-down by shaving up to 0.5 percentage points off June growth.
“Air cargo continues to be a difficult business with downside risks mounting. We still expect about 4% growth over the course of the year. But the deterioration in world trade is a real concern,” says Mr de Juniac. While air cargo is somewhat insulated from the current round of rising tariff barriers, an escalation of trade tension resulting in a ‘reshoring’ of production and consolidation of global supply chains could change the outlook significantly for the worse, he adds.
All regions except Africa reported a year-on-year increase in freight volumes in Jun-2018, but the slow growth in Asia-Pacific, which accounts for nearly 37% of the entire air cargo market, dragged the global growth rate down – its carriers reported FTK growth of +1.5%,
Elsewhere, Middle East carriers saw growth of +3.8%, European airlines FTKs rose +3.3%, while North American carriers’ freight volumes expanded +3.8% compared to the same period a year ago. The Latin American carriers’ performance was again the clear standout with growth of +5.9% in Jun-2018, albeit much lower than its performance in previous months. African carriers saw freight demand contract -8.5% in Jun-2018 compared to the same month last year as international FTKs fell at the fastest pace (-8.6%) for nearly nine years. Capacity also fell, by -1.4%.