Aviation: Strong Demand Growth Continues in June

IATA’s global passenger traffic data
for June shows that demand, measured in total revenue passenger
kilometers or RPKs, rose by 7.8% compared to the year-ago period.
The growth was in line with the 7.7% increase recorded in May.

All regions
reported growth with June capacity (available seat kilometers or ASKs)
increasing by 6.5%, and load factor rising 1.0 percentage point to

For the first six months of 2017, the industry
experienced a 12-year high in traffic growth (7.9%) and a record
first half load factor of 80.7%.

“A brighter economic
picture and lower airfares are keeping demand for travel strong.
But as costs rise, this stimulus of lower fares is likely to fade.
And uncertainties such as Brexit need to be watched carefully.
Nonetheless, we still expect 2017 to see above-trend growth,” said
Alexandre de Juniac, IATA’s Director General and CEO.

June international
passenger demand rose 7.5% compared to June 2016. All regions
recorded growth, led by airlines in Africa. Capacity climbed 6.2%,
and load factor climbed 1.0 percentage point to 80.6%.

Singapore Airlines new long-haul Business Class seat. Picture: Singapore Airlines

Asia Pacific airlines’ June traffic jumped 9.1% compared to
year-ago. Capacity rose 7.9% and load factor edged up 0.9 percentage points to 79.3%.The overall upward trend in
seasonally-adjusted traffic remains strong, although volumes have
slipped in recent months. Traffic on Asia-Europe routes continues
to trend upwards following terrorism related disruptions in early
2016. However, solid demand growth on international routes within
Asia has paused.

European carriers saw traffic rise 8.8% in
June compared to June 2016, which was up from a 7.5%
year-over-year increase recorded in May. Capacity climbed 6.5% and
load factor rose 1.8% percentage points to 85.9%, highest among
the regions. The stronger growth reflects both a favorable
comparison with the year-ago period, as well as increased momentum
in the regional economic backdrop.

Middle Eastern carriers
posted a 2.5% traffic increase in June, which was a slowdown from
the already subdued 3.7% growth seen in May. Capacity rose 3.1%,
and load factor slipped down 0.4 percentage points to 68.9%. While
most markets have seen demand slowing, it is most visible on the
Middle East-North America market, which has been affected by a
combination of factors including the (recently-lifted) ban on
personal electronic devices, as well as a wider negative
stimulation from the travel ban that has now been implemented for
certain countries. However, passenger traffic between the Middle
East and North America was already slowing in early 2017, in line
with a moderation in the pace of growth of the largest carriers in
the region.

North American airlines’ demand rose 4.4%
compared to June a year ago. Capacity climbed 4.1%, with load
factor inching up 0.3 percentage points to 84.5%. The
comparatively robust economic backdrop in North America is
expected to continue to support outbound passenger demand.
However, anecdotal evidence suggests that inbound tourism is being
deterred by the additional security measures in place for travel
to the US.

Latin American airlines experienced a 9.7% rise in
demand compared to the same month last year supported by strong
travel within the region, while travel to North America is flat to
down slightly. Capacity increased by 9.1% and load factor rose 0.4
percentage points to 82.1%.

African airlines’ traffic soared
9.9% in June. Capacity rose 7.1%, and load factor jumped 1.7
percentage points to 64.3%, although this still was the lowest
among regions. Conditions in the region’s two largest economies
have continued to diverge, with business confidence in Nigeria
rising sharply in recent months, while South Africa’s economy fell
into recession in the first quarter.

Domestic Passenger

Demand for domestic travel climbed 8.2% in June
compared to June 2016, up slightly from the 7.9% growth seen in
May. June capacity increased 7.0%, and load factor rose 0.9
percentage points to 84.3%. Led by China and India, all markets
reported demand increases, but with wide variation.

India led all markets with a 20.3% rise in domestic traffic in
June. However, the very strong upward trend in traffic has slowed
since  he country’s unexpected ‘demonetization’ in November 2016.
India’s streak of year-on-year double-digit traffic growth may
have ended with June.

China’s domestic traffic surged 17.6%
in June, which was ahead of the first half growth rate of 15.2%.
There continues to be little sign of any slowdown in the traffic
trend and second quarter GDP figures were stronger than expected.
Air travel demand is continuing to be stimulated by supply
factors, including ongoing growth in the number of unique
airport-pair routes served, which ultimately translates into time
savings for passengers.

Looking Forward

Air travel
recorded its fastest first-half growth in 12 years, pushing load
factors to record highs. And the peak northern summer travel
season is likely to be record-breaking.

“This is all good
news. The demand for travel is strong and that, in turn, will make
a positive contribution to the global economy. This growth will
also further expose infrastructure deficiencies. In every part of
the world airport and air navigation infrastructure is struggling
to cope with demand. There are plenty of examples linking
connectivity and economic prosperity. But few governments have
been able to deliver on the imperatives of sufficient capacity,
quality aligned with user needs and affordability. This year’s
strong growth is a reminder that there is no time to lose,” said
de Juniac.

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