IATA: Moderating Demand Trend for Air Cargo Continues in August; Passenger Growth Slowed in August

The International Air Transport Association (IATA) released data for global air freight markets in August 2016 showing that demand, measured in freight tonne kilometers (FTKs), rose 3.9% year-on-year. Freight capacity measured in available freight tonne kilometers (AFTKs) increased by 4.1% over the same period. Load factors remained historically low, keeping yields under pressure.

Industry conditions have improved since the particularly soft patch at the start of the year. Carriers in all regions except Latin America reported an increase in year-on-year demand in August. However, regional results varied considerably. For the third time in four months airlines based in Europe posted the highest collective annual growth of all regions, while airlines in the Middle East experienced their slowest growth in more than seven years.

"August numbers showed improvements in cargo demand. While this is good news, the underlying market conditions make it difficult to have long-term optimism. World trade volumes fell by 1.1% in July with no improvement on the horizon. And the current global political rhetoric in much of the world is more focused on protectionism than trade promotion. Economies need to grow out of the current economic doldrums. Governments should be focused on promoting trade, not raising protectionist barriers," said Alexandre de Juniac, IATA’s Director General and CEO.  

¹% of industry FTKs in 2015   ²Year-on-year change in load factor   ³Load factor level 

Regional Performance

Asia-Pacific airlines reported a 2.8% increase in demand for air cargo in August compared to last year. Capacity in the region expanded 1.2%. International traffic within the region has been the strongest of the ‘big-four’ markets (Asia Pacific, Europe, North America, and Middle East) so far this year, with traffic up by 6.5% year-on-year in July 2016.

North American carriers saw freight volumes expand 5.5% in August 2016 year-on-year, and capacity increase by 3.7%. International freight volumes grew by 4.6% in August – their fastest pace since the US seaports disruption boosted demand earlier in 2015. However, seasonally adjusted activity has barely altered from 2008 levels. The strength of the US dollar continues to keep the US export market under pressure.

European airlines posted the largest increase in freight demand of all regions in August 2016 – 6.6% year-on-year. Capacity increased 4.7%. The positive European performance corresponds with an increase in reported new export orders in Germany over the last few months. European freight demand has now broken out of the corridor that it occupied between mid-2010 and the start of the year.

Middle Eastern carriers saw air freight demand slump to 1.8% year-on-year in August 2016 – the slowest pace since July 2009. Capacity increased by 6.9%. The strong upward trend seen in Middle Eastern traffic over the past year or so has halted. In seasonally-adjusted terms, volumes in July 2016 were slightly below those seen in January 2016. The weakening performance is partly attributable to slower growth between the Middle East and Asia. This suggests that Middle Eastern carriers are facing stiff competition from European airlines on the Europe-Asia route.

Latin American airlines saw demand contract in annual terms for the sixth consecutive month. FTKs in August 2016 fell by 3.3% compared to the same period last year and capacity decreased by 0.2%. The region continues to be blighted by weak economic and political conditions, particularly in the region’s largest economy, Brazil.

African carriers saw demand rebound sharply in August to 3.7% - the fastest growth rate in 12 months. Despite this, freight capacity continues to outstrip demand, due to rapid long-haul expansion. Capacity surged in August year-on-year by 29.2%. The combination of rising capacity and modest growth has significantly affected the load factor of African airlines. In August 2016 it was almost six percentage points lower than a year ago and is around half the industry average. 

View August freight results (pdf)

Passenger

The International Air Transport Association (IATA) announced global passenger traffic data for August showing that demand (measured in total revenue passenger kilometers or RPKs) climbed 4.6% compared to the year-ago period. This represented a slowing from the 6.4% increase recorded in July (revised). August capacity (available seat kilometers or ASKs) increased by 5.8%, and load factor slipped 0.9 percentage points to 83.8%.

"Growth in passenger demand dipped to 4.6%. While that’s disappointing compared to the previous month’s performance, it is still healthy growth. And although terrorist attacks in Europe have dampened demand, the impact is ebbing," said Alexandre de Juniac, IATA’s Director General and CEO.

   ¹% of industry RPKs in 2015   ²Year-on-year change in load factor   ³Load factor level   

International Passenger Markets
August international passenger demand rose 4.7% compared to August 2015. All regions recorded increases, but growth was dominated by airlines in the Middle East. Capacity climbed 6.5%, causing load factor to slide 1.4 percentage points to 83.9%.

• Asia-Pacific airlines’ August traffic climbed 5.6% compared to the year-ago period. Capacity rose 6.8% and load factor slipped down 0.9 percentage points to 81.9%. There are signs of Asian travelers continuing to be put-off by recent terrorism in Europe. Traffic on Europe-Asia routes grew just 1.5% in July, the most recent month for which route-specific figures are available, while international traffic growth on routes within Asia accelerated to 9.9%.
• European carriers saw August demand climb 3.3% year-on-year. European traffic continues to be affected by the impact of terrorism, however, there are indications this may be easing. Capacity rose 5.1%, which caused load factor to drop 1.6 percentage points to 86.6%--which still was the highest among regions.
• Middle Eastern carriers posted a 10.3% traffic increase in August, while capacity climbed 13.7%, resulting in a 2.5 percentage point fall in load factor to 81.2%.
• North American airlines’ international demand rose 1.8% compared to August a year ago. However, seasonally-adjusted traffic has risen at an annualized rate of 7% since March, supported by transpacific demand and leisure routes to Central America and the Caribbean. Capacity rose 3.8%, causing load factor to drop 1.7 percentage points to 85.3%.
• Latin American airlines experienced a 6.7% demand rise compared to the same month last year, helped by strong demand on international routes within the region, spurred in part by the 2016 Summer Olympics in Brazil. Capacity increased by 4.0% and load factor rose 2.1 percentage points to 84.0%. Carriers in this region were the only ones to see a rise in load factor compared to the year-ago period.
• African airlines’ traffic climbed 1.8% in August. International growth has tracked sideways since the start of the year, reflecting challenges in the major economies. Capacity rose 3.1%, with the result that load factor slipped 1.0 percentage point to 75.6%, lowest among regions.

Domestic Passenger Markets 
Demand for domestic travel climbed 4.3% in August compared to August 2015, which was slightly exceeded by a 4.4% increase in capacity. Load factor slid 0.1 percentage points to 83.6%. All markets reported demand increases with the exception of Brazil and Russia, with India and China reporting double-digit rises.

¹% of industry RPKs in 2015   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      

• Russia’s domestic traffic fell 2.7% but the failure of Transaero last year has taken significant capacity out of the market, and load factor reached a record high for the month at 86.5%. It was also the highest among the domestic markets tracked by IATA.
• US airlines’ domestic traffic climbed just 1% year-on-year in August and traffic has trended sideways in seasonally-adjusted terms since late 2015. 

The Bottom Line : "Lower airfares are a major factor sustaining demand for air travel. And airline profitability is stronger than ever as a result of a better industry structure and efficiency gains. But the lingering impact of terrorist attacks in Europe earlier in the year reminds us that the aviation industry is vulnerable to many external factors beyond its control. The risks—including the normal ups and downs of the business cycle—won’t go away. The industry has improved resilience along with its profitability. That will be critical to responding quickly should the business environment change," said de Juniac.

View August passenger results (pdf)