IATA: Healthy April Passenger Demand ; Air Freight Momentum Slows

The International Air Transport Association (IATA) announced global passenger traffic results for April showing robust demand growth compared to April 2014. Total revenue passenger kilometers (RPKs) rose 5.9%. April capacity (available seat kilometers or ASKs) increased by 6.1%, and load factor slipped 0.1 percentage points to 79.4%.

Domestic demand grew by 7.2%, outpacing international demand which grew by 5.2% compared to April 2014.

“Demand for connectivity remains strong. That’s positive news. But the performance of the industry is multi-tiered. Middle East and Asia-Pacific based carriers led with growth well above the 5.9% average, while carriers in Europe and the Americas were below it. And African airlines reported a contraction compared to the previous year,” said Tony Tyler, IATA’s DG and CEO.
    

Apr 2015 vs. Apr 2014	RPK Growth	ASK Growth	PLF
International	5.2%	5.9%	78.6%
Domestic	7.2%	6.4%	80.8%
Total Market	5.9%	6.1%	79.4%

 

YTD 2015 vs. YTD  2014	RPK Growth	ASK Growth	PLF
International	6.4%	6.1%	78.2%
Domestic	6.1%	5.4%	80.3%
Total Market	6.3%	5.8%	79.0%

 International Passenger Markets

April international passenger demand rose 5.2% compared to April 2014. Airlines in all regions except Africa recorded growth led by the Asia-Pacific and Middle East. Capacity climbed 5.9% and load factor dipped 0.5 percentage points to 78.6%.

• Asia-Pacific airlines’ April traffic jumped 9.0% compared to the year-ago period. Capacity rose 6.0% and load factor surged 2.2 percentage points to 78.3%. To date the sharp reversal in regional trade activity after strong gains in late 2014 has not had an adverse impact on business-related international air travel.
• European carriers experienced a 3.7% demand increase in April versus April 2014. Capacity rose 4.7% and load factor declined 0.8 percentage points to 80.7%, still the highest among the regions for the month. Although signs are that a positive response to the European Central Bank stimulus has faltered owing to firming in the Euro and oil prices, economic stimulus is helping ease downward pressure on demand.
• North American airlines had just a 0.7% rise in traffic compared to April a year ago. US economic growth turned negative in the first quarter of 2015 while the stronger dollar is likely hampering inbound leisure travel. Capacity rose 4.1% and load factor fell 2.6 percentage points to 78.1%.
• Middle East carriers’ demand climbed 8.2% in April but this was exceeded by a 13.3% jump in capacity with the result that load factor dropped 3.6 percentage points to 77.2%  Economies in the region are reasonably well positioned to withstand the plunge in oil revenues and regionally-based carriers continue to gain market-share.
• Latin American airlines saw a 6.3% rise in traffic compared to April 2014. Capacity rose 7.3%, however, causing load factor to slip 0.7 percentage points to 77.7%. Regional trade volumes have been improving but Brazil’s economy remains a trouble spot.
• African airlines’ traffic fell 3.2% in April year-to-year, while capacity dropped 5.0%, resulting in a 1.3 percentage point rise in load factor to 67.5%. Negative economic developments in parts of the continent, including Nigeria, which relies heavily on oil revenues, are likely contributing to the depressed results.

Domestic Passenger Markets

Domestic travel demand rose 7.2% in April compared to April 2014, with the strongest growth occurring in India and China. Total domestic capacity also was up 6.4%, and load factor was 80.8%, up 0.6 percentage points.
  

April 2015 vs April 2014	RPK Growth	ASK Growth	PLF
Australia	0.1%	-1.8%	76.8%
Brazil	2.3%	0.9%	80.8%
China P.R	15.5%	13.2%	81.5%
India	20.7%	8.7%	82.0%
Japan	6.4%	2.6%	63.3%
Russian Federation	1.7%	13.2%	67.2%
US	4.3%	4.4%	85.2%
Domestic	7.2%	6.4%	80.8%

• India’s domestic demand jumped 20.7% in April compared to a year ago likely owing to continued market stimulation by local carriers as well noteworthy improvements in economic growth.
• China’s domestic traffic climbed 15.5% year-over-year but the strong momentum may not be maintained in the face of indications of slowing economic growth.
• Russian air travel remains weak, with just a 1.7% rise over the year-ago period, consistent with the economy being in recession.

The Bottom Line:

“As we head into the traditionally strong summer travel season in the Northern Hemisphere, the outlook for aviation is a mixed picture. Lower oil prices are helping to keep the cost of air travel down. The stronger US dollar, however, may dampen demand in some markets. And it remains to be seen how long robust travel demand can stand up in the face of a trio of bad economic news: unexpectedly poor first quarter performance in the US, continuing weakness in the Eurozone and slowing regional trade in Asia Pacific,” said Tyler. 

Strong passenger demand and cargo weakness will set the scene for the 71st IATA Annual General Meeting and World Air Transport Summit which will be held in Miami 7-9 June 2015.  “In just a few days, the global commercial aviation community will gather in Miami. Miami provides an excellent example of the economic power of connectivity provided by aviation. It is a well-established gateway between North and South America that has grown into a global aviation hub and prime destination for both leisure and business travelers. And that contributes to Miami’s prosperity by creating jobs and driving economic growth,” said Tyler.

View April Passenger Results (pdf)

CARGO

The International Air Transport Association (IATA) released data for global air freight markets showing a 3.3% increase in cargo volumes (freight tonne kilometers  or FTKs) in April 2015 compared to April in the previous year. While there is growth compared to the same month in 2014, there has been no actual growth in aggregated global cargo volumes since late last year.

At a regional level, only the Asia-Pacific and Middle Eastern airlines reported growth in April. North American carriers reported essentially flat demand, while Europe, Latin America and Africa all reported declines when compared to 2014. April data also revealed a slowdown from the growth for the first quarter of 2015, which averaged 5.3%, in line with a recent weakening in world trade growth. Despite a cyclical pick-up in the global economy, acceleration in trade and air freight demand is unlikely in the near term as business confidence and export orders are flat or declining.

“After a volatile start to 2015, the market is settling down, and it is clear that momentum in air freight growth is being lost. First there is the structural challenge of world trade no longer expanding at a faster rate than domestic production. Layered on top of that trend we now see a weakening of economic indicators in the crucial air cargo markets of Asia-Pacific and Europe,” said Tony Tyler, IATA’s Director General and CEO.

“These factors point toward a need to kick-start trade by reversing protectionist trade measures. Implementing the Bali Trade Facilitation Agreement would be a good start, as well as commitments to help facilitate trade in emerging markets,” said Tyler.

Apr 2015 vs. Apr 2014	FTK Growth	AFTK Growth	FLF
International	3.6%	6.6%	47.8%
Domestic	0.9%	1.2%	31.2%
Total Market	3.3%	5.5%	44.7%

 

YTD 2015 vs. YTD  2014	FTK Growth	AFTK Growth	FLF
International	4.8%	6.3%	48.8%
Domestic	1.2%	-0.4%	30.7%
Total Market	4.3%	4.9%	45.3%

Also of note was the significant capacity increase of 5.5% in April 2015, driving the load factor down to its lowest for the past 12 months.  

Regional analysis in detail

• Asia-Pacific carriers reported demand growth of 4.5% in April compared to April 2014, below a capacity expansion of 7.0%. Current trade volumes for emerging Asia markets are down 10%, and the region has been affected by a slowdown in exports to Europe.
• European carriers saw demand decline by 0.3% in April, compared to a year ago while capacity grew by 5.0%. Recent improvements in European business confidence have yet to be reflected in air freight volumes. A firming-up of oil prices and the Euro has meant that positive momentum from the European Central Bank stimulus has faltered.
• North American airlines reported demand growth of 0.1% year-on-year while capacity was cut by 1.6%. A disappointing economic performance in the first quarter is expected to improve in the coming months, with the likely impact of falling oil prices and the end of the West Coast port strikes. 
• Middle Eastern carriers saw demand grow by 14.1%, on the back of increased trade within the region, along with network and capacity expansion. Capacity grew 18.5%.
• Latin American airlines reported a fall of 6.8% in demand, while capacity grew by 7.0%. Month-on-month results for carriers in the region indicate that recent declines may have come to an end. The hope is that general increases in regional trade activity start to be reflected in stronger air freight demand.
• African airlines experienced a 0.2% decline in demand and a 2.2% decrease in capacity. The region still appears to be affected by the under-performance of the Nigerian and South African economies.

Bottom Line

“After a brief optimistic period, the global outlook for cargo shows that once again the business is stagnating. But the good news is that with digital processes, new standards for pharmaceutical handling, and a focus on reducing end-to-end shipment times the air cargo industry is well-placed to stage a recovery. On 7-9 June the world’s aviation leaders will gather in Miami, Florida, for the 71st IATA Annual General Meeting (AGM) and World Air Transport Summit. The Cargo Strategies session will explore how the industry is going to make real progress on these initiatives,” said Tyler.
Other topics under discussion at the AGM include:

• The relationship between airlines and manufacturers
• What’s on the mind of the industry’s CEOs
• What the next generation of travelers expects
• Cargo strategies
• Building the right infrastructure, and
• How investible are airlines

View April Air Freight Results (pdf)