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December 2017

October passenger demand rebounds from weather-struck September

Published: Wednesday 06 December 2017

By Halo Financial Team

The International Air Transport Association (IATA), which represents nearly 275 airlines and 83% of global air traffic, announced today that global passenger traffic results for October show that demand – measured in revenue passenger kilometres (RPKs) – rose 7.2% compared to the same month last year. Capacity grew 6.2% and load factor climbed 0.8 percentage points to 80.8%, which was a record for the month. This represents a strong bounce-back after the hurricane-related disruptions in September 2017. Both domestic and international travel growth was largely in balance for the month.

Alexandre de Juniac, IATA’s Director General and CEO, commented: "As expected, the recent severe weather in the Americas region had only a temporary impact on the healthy travel demand we have seen this year, and we remain on course for another year of above-trend growth."
 
October 2017
(% year-on-year)
World share¹ RPK ASK PLF
(%-pt)²         
PLF
(level)³  
        
Total Market 100.0% 7.2% 6.2% 0.8%       80.8%
Africa 2.2% 5.7% 2.2% 2.4% 71.9%
Asia Pacific 32.9%       10.1% 8.9% 0.8% 80.2%
Europe 26.4% 6.3% 4.5% 1.4% 84.3%
Latin America 5.2% 6.7% 4.9%       1.4% 82.5%
Middle East 9.6% 6.8% 5.4%       0.9% 69.4%
North America 23.8%       4.8%       5.3% -0.4% 83.3%
 
   ¹% of industry RPKs in 2016   ²Year-on-year change in load factor   ³Load factor level  Source: IATA

International Passenger Markets

October international passenger demand rose 7.3% compared to October 2016, which was an improvement compared to the 6.6% demand increase for September 2017. Airlines in all regions recorded growth. Total capacity climbed 6.0%, and load factor increased 1.0 percentage point to 79.4%.
  • Asia-Pacific airlines led all regions with traffic growth of 10.3% compared to the year-ago period, which was up from an 8.7% rise in September. Capacity climbed 8.4% and load factor rose 1.3 percentage points to 78.0%. Seasonally-adjusted passenger volumes are rising at an annualized rate of 8-9%, supported by the solid regional economic backdrop and strong growth in the number of connections.
  • European carriers’ October demand climbed 6.2% over October 2016, which was a slowdown compared to the 7.2% year-over-year growth recorded for September. Capacity increased 4.5% and load factor rose 1.3 percentage points to 84.9%, highest among regions. While economic conditions have shown strong improvement over the past year or so, the upward trend in seasonally-adjusted traffic has slowed considerably since May. This reflects the nature of international travel in the region, which is predominantly short-haul and hence, highly-price sensitive.
  • Middle East carriers experienced a 6.9% rise in demand in October, improved from 3.9% in September. Capacity increased 5.3%, and load factor climbed 1.0 percentage point to 69.6%. As in Europe, the upward trend in RPKs has slowed. Demand to and from North America fell in year-on-year terms for the seventh consecutive month in September (the most recent month for which route-specific figures are available) and it remains the only international market not to have grown in annual terms this year. Traffic has been heavily affected by the now-lifted ban on portable electronic devices, as well as from the proposed travel bans to the US.
  • North American airlines’ traffic climbed 3.7% in October compared to the year-ago period, lowest among the regions but an improvement compared to the hurricane-impacted 3% growth in September. Capacity rose 5.2% and load factor dropped 1.1 percentage points to 79.2%. North America was one of just two regions to post a load factor decline. There continue to be indications that inbound travel to the US is being deterred by the additional security measures now involved with travelling to that country.
  • Latin American airlines had an 8.7% increase in traffic in October, which was a slowdown from September growth of 10.7%, but still the second strongest percentage growth among regions. On a seasonally-adjusted basis, however, volumes are slightly below where they were three months ago. This may indicate spill over from the impact of Hurricanes Irma and Maria. Capacity climbed 9.1%, and load factor slipped 0.3 percentage points to 82.6%.
  • African airlines’ traffic grew 7.5% year-on-year in October, up from 3.6% in September. Conditions in the region’s two largest economies—Nigeria and South Africa, still are diverging, with business confidence levels in Nigeria near a three-year high, while confidence levels in South Africa are consistent with falling economic activity. Capacity rose 3.4%, and load factor jumped 2.7 percentage points to 70.9%.

Domestic Passenger Markets       
Domestic demand climbed 7.2% in October compared to October 2016, while capacity rose 6.6%. India and China continued to lead all markets, with double-digit growth rates.
 
October 2017
(% year-on-year)       
World share¹ RPK ASK PLF     
(%-pt)²     
PLF
(level)³  
Domestic 36.4%      7.2% 6.6%     0.4%       83.4% 
Australia 1.0% 2.8% 1.4% 1.1% 79.8%
Brazil  1.2% 7.7% 2.7% 3.9% 83.2%
China P.R              8.7% 10.0% 11.0%        -0.8% 84.3%             
India              1.3% 20.4% 15.5% 3.4% 84.9%
Japan              1.1% 2.3% -0.8%              2.3% 76.1%
Russian Fed.              1.3% 6.1%          2.3%  2.9%            80.2%
US 15.0% 5.3%       5.4% -0.1% 85.6%
 
¹% of industry RPKs in 2016   ²Year-on-year change in load factor   ³Load factor level  *Note: the seven domestic passenger markets for which broken-down data are available account for 30% of global total RPKs and approximately 82% of total domestic RPKs. Source: IATA       
  • Brazil’s domestic market climbed 7.7% year-on-year in October, which was a 27-month high as the economy slowly continues to recover from the deep recession of recent years.
  • Russia’s domestic traffic rose was 6.1% in October, which was the slowest pace in a year.
Continued demand and industry growth

"Demand for air travel remains strong as we head into the holiday travel season, and signs point to the broad-based economic upturn continuing into 2018, which is good news for demand for air travel," said de Juniac.  

David Johnson, Founding Director at currency specialist, Halo Financial, commented on the news, “Domestically in the UK, we have seen continued robust demand, with the UK’s most popular airports seeing their busiest period yet. The road ahead looks profitable and positive for the industry, according to the latest forecasts

This comes in the face of Brexit uncertainty and a weak British Pound, which are in turn taking their toll on aviation businesses that have not been able to secure suitable hedging and currency strategies. The need for careful business planning and looking ahead is stronger now than ever – it will be interesting to see how events unfold throughout 2018 and how economic and political forces affect the aviation industry.” 

You can see IATA’s full October passenger traffic analysis here

For more information, infographics and the latest currency insights, visit www.halofinancial.com/news