Summary:
- Latest IATA performance metrics show global passenger demand grew +6.2% in Jul-2018, down on last month, but a solid start to the peak passenger demand season. Capacity climbed +5.5% and industry load factor rose +0.6 percentage point to 85.2%;
- Domestic demand rose +7.8% in Jul-2018, while international demand grew +5.3% delivering average monthly loads of 85.6% and 85.0% respectively;
- Air freight recorded slowing demand (+2.1%) and capacity (+3.8%) growth as capacity growth outstripped demand growth for another month;
- All regions with the exception of Africa reported monthly growth on 2017 freight levels, while Latin America joined Africa in reporting capacity exceeding demand growth.
In the passenger market global passenger traffic demand (measured in revenue passenger kilometres, or RPKs) rose +6.2% compared to Jul-2017. This was down from 8.1% year-over-year growth in Jun-2018, but still represents a solid start to the peak passenger demand season. Monthly capacity (available seat kilometres or ASKs) increased by +5.5% and load factor rose +0.6 percentage point to 85.2%.
Demand for domestic travel climbed +7.8% in Jul-2018 compared to last year, once again led by by double-digit gains in India (+18.3%) and China (+14.8%). They were joined in double-digits this month as well by Russia which delivered a +10.8% domestic growth, a 13 month high as rising world oil prices help support economic activity as well as incomes and jobs. US domestic traffic also surged to a five-month high of +5.6%, well above the five-year average of +4.2%, boosted by the rising US economy.
The global figure was broadly in line with the +8.0% growth recorded in Jun-2018. All major markets reported demand increases, but with wide variation. Domestic capacity increased +6.9%, and load factor edged up +0.8 percentage points to 85.6%.
During the month international passenger demand rose +5.3% compared to Jul-2017, a significant deceleration compared to the +8.2% growth recorded in Jun-2018. Total capacity climbed +4.7%, and load factor edged up half a percentage point to 85.0%. All regions reported growth, led by Asia-Pacific for the first time in three months.
Looking at international performance from a regional perspective…
- Asia-Pacific airlines' Jul-2018 traffic rose +7.5% over the year-ago period, a slowdown compared to Jun-2018 growth of +9.6%. Capacity increased +6.0% and load factor rose 1.1 percentage points to 82.1%.
- European carriers posted a +4.4% rise in traffic for Jul-2018 compared to a year ago, down from +7.1% annual growth in Jun-2018. Capacity rose +3.9%, and load factor climbed 0.5 percentage point to 89.1%, highest among the regions.
- Middle East carriers had a +4.8% increase in demand for Jul-2018, well down on the +11.2% growth recorded for Jun-2018, although this mainly is attributable to volatility in the data a year ago. Capacity climbed +6.5% compared to a year ago and load factor dropped 1.3 percentage points to 80.3%.
- North American airlines' traffic climbed +4.1% compared to Jul-2017 a year ago. This was down from +6.0% growth in Jun-2018, but still ahead of the 5-year average pace for carriers in the region. Capacity rose +2.8% and load factor climbed 1.1 percentage points to 87.2%, second highest among the regions.
- Latin American airlines experienced a +3.8% rise in traffic in Jul-2018, the slowest growth among the regions and a decline from +5.6% year-over-year growth in Jun-2018. Capacity rose +4.6% and load factor slid 0.6 percentage point to 84.2%. African airlines' Jul-2018 traffic rose +6.8%, second highest among the regions, but a decline from +11.0% growth recorded in Jun-2018. Capacity rose +3.9% and load factor jumped 2.1 percentage points to 76.0%.
"The second half of the year got off to a solid start. The strong demand we experienced in Jul-2018 is confirmation that summer is when people want to travel, to explore new places and to reunite with friends and family," says Alexandre de Juniac, director general and CEO of IATA. But he noted that unfortunately for air travellers in Europe, summer also brought "delays and disappointment," while for airlines, it meant accepting "schedule inefficiencies and longer flight times"
"That's because air traffic capacity has not kept pace with demand and because some controllers used the opportunity of the peak traffic period to launch strikes and work slowdowns. Travellers want to get to their holidays on time," he adds.
Air freight growth continues, but the pace has slowed to new two-year low
IATA reports that global air freight demand, measured in freight tonne kilometres (FTKs), rose +2.1% in Jul-2018, compared to last year. This continues the slowdown in air cargo growth that began earlier in 2018 and is actually the slowest pace of growth seen since May-2016 and well below the five-year average growth rate of +5.1%.
Freight capacity, measured in available freight tonne kilometres (AFTKs), grew by +3.8% year-on-year. This was the fourth time in five months that capacity growth outstripped demand growth.
The airline group says that indicators such as the end of the re-stocking cycle at the beginning of the year, a broad-based weakening in manufacturing firms' export order books and longer supplier delivery times by manufacturers in Asia and Europe, show that growth is expected to continue at a slower pace. For the Jul-2018 data, like last month also, it also notes that the temporary grounding of the Nippon Cargo Airlines fleet may have exaggerated the slowdown in growth.
But while Jul-2018 demand for air cargo grew at its slowest pace since 2016, IATA still sticks with its estimated +4% growth over the course of the year, however it says the downside risk has increased. "The tariff war and increasingly volatile trade talks between the world's two largest trading nations - China and the US - are rippling across the global economy putting a drag on both business and investor sentiment. Trade wars only produce losers," says Mr de Juniac.
All regions reported year-on-year demand growth in Jul-2018, except Africa which contracted. All regions, except Africa and Latin America, reported that capacity growth exceeded growth in demand.
In the world's largest cargo region Asia-Pacific airlines saw demand for freight lose momentum in Jul- 2018 - growth slowed to +0.9% compared to the same period last year. Capacity increased by +3.9%. Elsewhere, freight volumes expanded +2.6% and capacity rose +4.0% in North America as the recent momentum of the US economy and the US dollar has helped strengthen demand for air imports. Meanwhile, in Europe, airlines posted a +2.6% increase in freight volumes and a +4.4% in cargo capacity.
Middle Eastern carriers' posted the fastest growth of any region in Jul- 2018 with an increase in demand of +5.4% compared to the same period a year earlier. Capacity increased +6.3% with seasonally-adjusted freight volumes continuing to trend upwards. On the flip side Latin American airlines experienced a slowdown in freight demand growth in Jul- 2018 to +3.0%. This was only a quarter of the growth rate seen in June 2018 (+11.4%) but positively was still above the 5-year average pace of +2.1%. Capacity decreased -7.8%. Similarly, African carriers also saw freight demand contract in Jul- 2018, by a significant -8.3% compared to the same month last year. This was the fourth time in five months that demand has contracted.