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Good times roll as global air traffic demand soars

January 13, 2017 Headline News No Comments Email Email

Demand for air travel has lifted, with demand growth in November 2016 reaching its highest point in nine months and the uplift most notable in Europe and the Asia Pacific regions.

The European result is highly encouraging, given that the region has been hit by terrorism aimed at hurting tourism, and the Asia Pacific result is good news because it’s the region that includes Australia.

The result suggests good times are rolling, or are set to roll.

Latest figures from the International Air Transport Association (IATA)  show total revenue passenger kilometres (RPKs) rose 7.6% compared to November 2015. Capacity (available seat kilometres or ASKs) increased by 6.5%, and load factor rose 0.8 percentage points to 78.9%.

Travel upswing

“Stronger demand for air travel reflects – and is supporting – a pick-up in the global economic cycle,” IATA’s director general and chief executive, Alexandre de Juniac, commented.

“As the stimulus effect of lower oil prices recedes in the rear-view mirror, the strength of the economic cycle will play a key role in the pace of demand growth in 2017.”

November international passenger demand rose 8% compared to the year earlier, with airlines in all regions showing growth. Total capacity climbed 6.8%, and load factor edged up 0.9 percentage points to 77.1%.

  • European carriers saw demand increase by 8.3% in November 2016, while traffic grew at an annualised pace of 12% over the past five months or so. This suggests that the disruption caused by terrorism and political instability has lifted, against a backdrop of a growing Eurozone economy. Capacity rose 6.8% and load factor climbed 1.1 percentage point to 80.8%.
  • Asia-Pacific airlines’ November traffic also climbed 8.3% compared to the year-ago period. Capacity increased 7.1% and load factor rose 0.8 percentage points to 77.4%. The strong upward trend in demand has slowed recently but it is not clear whether this is a longer-term development or just a brief pause.
  • Middle East carriers led all regions with a 12.2% demand increase. But the upward trend in the region’s seasonally adjusted traffic has paused, with November’s level coming in unchanged from that of July. Capacity rose 11.6% and load factor rose 0.3 percentage points to 68.7%.
  • North American airlines’ traffic climbed 1.5% in November. Traffic across the Pacific is growing rapidly but North Atlantic demand is moderating. Capacity rose 1.2% and load factor edged up 0.2 percentage points to 78.7%.
  • Latin American airlines saw November traffic climb 7.3% compared to November 2015. Capacity increased by just 2.9%, pushing load factor up 3.4 percentage points to 82.2%. The upward trend in international traffic has remained strong despite difficult conditions on the North America-South America route, supported by healthy international demand within South America.
  • African airlines experienced an 8.2% rise in demand compared to November 2015. Economic conditions in much of Africa remain challenging, particularly in the biggest economies of Nigeria and South Africa, but the upward trend in seasonally-adjusted passenger traffic has reasserted itself more recently, supported by strong demand on routes to and from Asia and the Middle East. Capacity rose 5.1% and load factor climbed 1.9 percentage points to 66.3%.

The Bottom Line

“The airline industry continues to deliver strong results,” de Juniac said. “In 2017, for a third consecutive year, the industry’s return on invested capital will exceed the cost of capital.

“Passengers benefit from the industry’s success. Travel has never been more accessible – with great fares, many options and more destinations. Nevertheless uncertainty lies ahead.

“The threat of terrorism, questions over the durability of the economic upswing, rising oil prices and increasing protectionist rhetoric are among the concerns. The industry has reshaped itself and strengthened its resilience to shocks. We should see another solid year of collective profitability for the airlines in 2017. But we must be vigilant.”

Edited by Peter Needham

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