IATA’s revises its latest market forecast as concerns of protectionist measures and trade tariffs leads to minor slowing in its passenger growth outlook

Around 60 million less annual passengers in a global market that could double to 8.2 billion annual passengers by 2037 is just a shallow change to the International Air Transport Association (IATA) market forecast, but does highlight the increasing concerns that protectionist measures and trade tariffs will directly impact the growth of the sector.


Summary:

  • IATA has revised the latest edition of its Air Passenger Forecast down by the smallest of margins due to concerns of political protectionist measures;
  • Despite the concerns, IATA still predicts that the industry will grow at a compound annual growth rate (CAGR) of +3.5% over the next 20 years;
  • The updated air passenger forecast shows that an increasing shift Eastwards in the centre of gravity of the industry is behind the continued strong growth.

IATA has this week revealed its new 20 year passenger forecast and has revised it down by the slightest of margins, anticipating a +3.5% compound annual growth rate (CAGR) through to 2037, down -0.1 percentage points compared to last year’s outlook. It includes the warning that growth prospects for air transport, and the economic benefits driven by aviation, could be curtailed if protectionist measures are implemented by governments.

It is a concern in what is otherwise expected to be a significant growth period of the industry with the doubling of air passengers in the next 20 years supporting 100 million jobs globally. The latest update to the air passenger forecast shows that an increasing shift Eastwards in the centre of gravity of the industry is behind the continued strong growth with the Asia-Pacific region driving the biggest growth with more than half the total number of new passengers over the forecast period.

Growth in this regional market is being driven by a combination of continued robust economic growth, improvements in household incomes and favourable population and demographic profiles, and as previous outlooks have shown will see China displace the United States of America (USA) as the world’s largest aviation market  in the mid-2020s.

Elsewhere around the region, India will take third place after the USA, surpassing the UK around 2024, Indonesia is forecast to be a standout performer and will climb from tenth to the fourth largest aviation economy by the early 2030s, while Thailand is expected to enter the top ten markets around 2030, replacing Italy.

IATA says the CAGR of +3.5% assumes an unchanged policy framework over that period, albeit some policy shifts are likely over the time period. Should protectionism continue to expand in a “reverse globalisation” scenario, IATA says aviation would continue to grow, but at a slower pace and deliver fewer economic and social benefits.

“Global prosperity depends on air connectivity. Aviation is sensitive to policies that either support or undermine growth. And these seem to be pointing in the wrong direction,” says Alexandre de Juniac, director general and CEO.

No matter which growth scenario comes to pass, aviation faces an infrastructure crisis, warns IATA, which urges governments to work more closely with the industry, to be more ambitious in developing efficient infrastructure, fit for purpose, and offering value for money.

As can be expected, the rates of growth will differ across the world with some regions growing at double the rate of others. The CAGR of 4.8% in Asia-Pacific will deliver an extra 2.35 billion annual passengers by 2037, for a total market size of 3.9 billion passengers.

The second and third fastest regions for growth are Africa and the Middle East. Africa has a forecast CAGR of 4.6% delivering an extra 199 million passengers for a total market of 334 million passengers, while the Middle East has an expected CAGR of 4.4%, adding an extra 290 million passengers on routes to, from and within the region by 2037 and growing its market size to 501 million passengers.

Elsewhere, Latin American markets will grow +3.6%, serving a total of 731 million passengers, an additional 371 million passengers annually compared to today; the North American region will grow +2.4% annually and in 2037 will carry a total of 1.4 billion passengers, an additional 527 million passengers; while Europe will see the slowest growth at +2.0%, and will see an additional 611 million passengers and building a market of 1.9 billion passengers.