Worldwide air passenger demand soared 7.8% in the year to June 2018, the latest figures show, growing 1.8% faster than annual growth in May and June, according to the latest International Air Transport Association (IATA) figures.
Turbulent times ahead?
But experts warn of turbulent times ahead, with trade wars already slowing freight growth and fears that passenger numbers will be hit in future, too.
‘Trade wars never produce winners’
Alexandre de Juniac, IATA Director General and Chief Executive Officer, says, "Trade wars never produce winners. Governments must remember that prosperity comes from boosting their trade, not barricading economies."
29 days of disruption
In the first six months of 2018, European Union
travellers faced an unprecedented 29 days of disruption due to Air Traffic Control strike
Ryanair pilots strike
In addition, summer strike action by European air traffic controllers and pilots, including those from budget European airline Ryanair in Germany, Sweden, Ireland, Belgium and Holland, is forcing the cancellation of thousands of flights.
Asia-Pacific tops passenger traffic market
Asia-Pacific leads total passenger traffic market by region on 33.7%. It is followed by Europe on 26.6%, North America 23%, Middle East 9.5%, Latin America 5.2%, and Africa 2.2%.
June capacity, measured in available seat kilometres (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%, a strong performance, but down from 8.3% growth recorded in the first half of 2017.
Trade wars casting long shadow
Alexandre de Juniac says, "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. But the looming prospect of a global trade war is casting a long shadow.
Additionally, rising cost inputs—fuel prices have soared by approximately 60% over the past year—are reducing the stimulus of lower fares.”
International passenger demand up 7.7%
June international passenger demand rose 7.7% compared to June 2017. All regions recorded growth, led by airlines in the Middle East and Africa. Capacity climbed 5.9%, and load factor increased 1.4 percentage points to 81.9%.
Middle East leads growth
Middle Eastern carriers posted an 11% demand increase in June compared to the same month last year. This was a sharp turnaround from the flat traffic growth in May, which was partly attributable to the timing of Ramadan between the two years. Results in 2017 were also affected by the ban on large portable electronic devices and travel restrictions imposed by the United States for visitors from certain Middle East and African countries. Capacity rose 8.0% and load factor climbed 1.9 percentage points to 71.0%.
Strong demand for African airlines
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%. Higher oil and commodity prices are buoying the economies in a number of countries, including Nigeria.
Regional economic growth boosts Asia-Pacific
Asia-Pacific airlines’ June traffic rose 9.5% year-on-year, up from 7.7% annual growth in May. Capacity rose 7.4% and load factor edged up 1.5 percentage points to 80.6%. Demand is being stimulated by robust regional economic growth.
Strikes could hit Euro business
European carriers saw traffic rise 6.1% in the year to June 2018, 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%, the highest among the regions. Growth is supported by a relatively healthy economic backdrop. However, the possibility of air traffic control strikes could affect growth over the coming months.
Trade disputes concern for US growth
North American airlines’ demand rose 5.9% compared to June a year ago, an improvement from May’s 5% growth. Capacity climbed 3.6%, with load factor increasing 1.9 percentage points to 86.7%. Increasing momentum in the US economy is supporting growth in passenger volumes, but prospects of further escalation in trade disputes could affect future demand.
Latin American growth slowing
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 and there are some possible indications of a slowing in demand growth. Capacity increased by 6.5% and load factor slipped 0.7 percentage point to 81.4%. Latin America was the only region to post a decline in load factor in June.
Domestic Passenger demand up 7.9%
Demand for domestic travel climbed 7.9% in June compared to June 2017, up from 6.7% annual growth in May. June capacity increased 7.5%, and load factor edged up 0.3 percentage point to 84.5%. Led once again by double-digit gains in India (17.6%) and China (15.3%), all markets reported demand increases, but with wide variations.
Freight growth fears
- Brazil’s domestic traffic rose 5.3% in June, up from 3.8% in May. Despite the improved performance, demand was still affected by the residual impact of the recent general strikes.
- Japan’s domestic traffic climbed 3.7% compared to a year ago, which was well up on the 1.7% growth recorded in May. However, there are some possible indications of a softening economic backdrop going forward.
- Australia’s domestic traffic rose 1.9% year-on-year, the slowest rise in June.
There are also concern over global freight growth, which slowed in June amid rising trade tensions.
Despite demand, measured in freight tonne kilometres (FTKs), rising 2.7% in June year-on-year, growth for the first half of 2018 remains at 4.7%, less than half the growth rate in 2017.
"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.
Freight capacity up 4.1%
Freight capacity, measured in available freight tonne kilometres (AFTKs), rose by 4.1% in June 2018 and has exceeded demand growth for three months running.
The slowdown has been driven by three main factors - the restocking cycle ending in early 2018, global trading conditions suffering a structural slowdown and the temporary grounding of the Nippon Cargo fleet in the second half of June.
Although air cargo has been "somewhat insulated" from rising tariffs, Alexandre de Juniac warns that any escalation in current trade tensions would "change the outlook significantly for the worse."
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