IATA: Double Digit Demand Growth for Freight Continued in August ; Strong Passenger Growth in August

The International Air Transport Association (IATA) released data for global air freight markets showing that demand, measured in freight tonne kilometers (FTKs), increased by 12.1% in August 2017, compared to the same period a year ago. This was the fifth time in six months of double-digit gains on the previous year’s performance. Demand is growing at exceptional speed when compared to the five-year average growth rate of 4.4%.

Freight capacity, measured in available freight tonne kilometers (AFTKs), grew by 4.7% year-on-year in August 2017. Demand growth continues to significantly outstrip capacity growth, which is positive for industry load factors, yields, and financial performance.

The strong performance of air freight demand corresponds with the pick-up in global trade. World trade volumes grew 4.2% in the first seven months of 2017 compared to 2016, their strongest performance since 2011. This is consistent with rising export orders, which are currently around their highest levels since March 2011, and upbeat business confidence indicators.

Signs that the peak of the cyclical growth period may be near also continue. The global inventory-to-sales ratio in the US, for example, has stopped falling. This usually means that re-stocking to meet demand (which gives air freight a boost), is ending.

The outlook for air freight remains strong. With several months of double-digit growth in 2017, the current IATA forecast of 7.5% growth in air freight demand for 2017 appears to have significant upside potential even if we are approaching a cyclical peak.

"Air cargo had another stellar performance in August. Demand for air cargo grew at a double-digit rate for the fourth month in a row - outperforming demand for passenger travel for the fourth consecutive month. Rapid growth in cargo demand means that cargo capacity is now growing in response to real cargo demand rather than automatically as carriers responded to passenger demand. The pace of capacity growth, however, has slowed even as freighter fleets are being utilized more intensely. Overall, that should be good news for much beleaguered cargo yields," said Alexandre de Juniac, IATA’s Director General and CEO.  

¹% of industry FTKs in 2016   ²Year-on-year change in load factor   ³Load factor level              

Regional Performance    

All regions with the exception of Latin America posted double digit freight growth in August 2017.  

• Asia-Pacific airlines’ freight volumes grew 11.3% in August 2017 compared to the same period a year earlier, and capacity increased by 5.7%. Demand growth was strong on all the major routes to, from and within Asia-Pacific, consistent with strong export order books for the region’s manufacturers. Seasonally-adjusted international freight volumes increased in August after a slight dip in July and are now almost 6% above the volumes reached following the 2010 post-global financial crisis bounce-back.
• North American carriers posted an increase in freight volumes of 11.7% in August 2017, and a capacity increase of 3.7%. Seasonally-adjusted international freight volumes remain strong. The strength of the US dollar has boosted the inbound freight market over the past few years. Data from the US Census Bureau shows a 12.7% increase in air imports to the US in the first seven months of 2017, compared to a slower rise in export orders of 5.8%. Despite the US dollar remaining strong by historical standards, its slight decline since the start of the year is expected to start to help rebalance trade flows.
• European airlines posted an 11.8% increase in freight demand in August 2017 and a capacity increase of 5.1%. Double-digit growth in international demand has now been recorded in 10 of the past 12 months. Concerns that the recent strengthening of the euro may have affected the regions’ exporters have not materialized. In fact German manufacturers’ export orders are growing at their fastest pace since early-2010.
• Middle Eastern carriers’ year-on-year freight volumes increased 14.1% in August 2017 and capacity increased 2.8%. The strong pick-up in demand largely reflects favorable comparisons to a short-lived weak patch in demand in 2016 rather than an acceleration in the current demand trend. Seasonally-adjusted international freight volumes have maintained their solid upward trend. However, amid strong competition from other region’s carriers particularly on the Asia-Europe route, the Middle East carriers are not seeing as strong a pickup in the seasonally-adjusted traffic trend as other region’s carriers.  
• Latin American airlines experienced a growth in demand of 8.5% in August 2017 and capacity increased by 9.3% compared to the same period in 2016. International freight volumes increased by 9.5% over the same period. This is close to a seven-year high and well above the five-year average rate of -0.1%. Seasonally-adjusted international freight volumes grew strongly for the sixth consecutive month in August, however they remained 4% lower than their peak in 2014. Despite this, seasonally-adjusted demand has been trending upwards at an annualized rate of about 20% over the past six months. The pick-up in demand reflects signs of economic recovery in the region’s largest economy, Brazil.
• African carriers posted the largest year-on-year increase in demand of all regions in August 2017 with freight volumes growing 29.4%. This is a slight slowdown from July but still more than three times the five-year average pace of growth of 8.8%. Capacity increased by 5.9% over the same period. Demand has been boosted by very strong growth on the trade lanes to and from Asia which increased by more than 67% in the first half of the year.

View August air 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 7.2% compared to the year-ago period. At the same time, the upward trend in seasonally-adjusted traffic has eased from that seen at the end of 2016. August capacity (available seat kilometers or ASKs) increased by 6.3%, and load factor climbed 0.7% percentage points to 84.5%, which was just below the record for the month set in 2015.

"Following the strong summer traffic season in the Northern hemisphere, 2017 is on course to be another year of strong traffic growth. However, some important demand drivers are easing, particularly lower fares. As we head towards the end of the year we still expect growth to continue, but potentially at a slower pace," said Alexandre de Juniac, IATA’s Director General and CEO.

   ¹% of industry RPKs in 2016   ²Year-on-year change in load factor   ³Load factor level   

International Passenger Markets

August international passenger demand rose 7.0% compared to August 2016. All regions recorded increases, led by airlines in Latin America. Capacity climbed 6.1%, and load factor edged up 0.8 percentage points to 84.5%.      

• European carriers saw August demand climb 6.9% year-to-year, which was a slowdown from the 7.9% growth recorded in July. International traffic on routes within Europe has slid in recent months, in seasonally-adjusted terms, despite a strengthening regional economic backdrop. Traffic conditions on the Europe-Asia route have also softened on a seasonally-adjusted basis. Capacity rose 5.5%, and load factor climbed 1.2 percentage points to 88.3%, which was the highest among regions.
• Asia-Pacific airlines’ August traffic increased 8.6% compared to the year-ago period, which was an acceleration compared to the 6.6% rise in July. However, the same trend of softening demand growth on routes within the region was apparent. Capacity rose 8.3% and load factor inched up 0.2 percentage points to 81.4%.
• Middle Eastern carriers posted a 5.5% traffic increase in August, well below the five-year average pace of 11.1%. The Middle East-to-North America market in particular has been hit by a combination of factors, including the now lifted cabin ban on large portable electronic devices, as well as a wider impact from the proposed travel bans to the US. Traffic growth on the segment was already slowing in early-2017, in conjunction with an easing in the pace of growth of nonstop services flown by the largest Middle Eastern airlines. Capacity increased 5.1%, with load factor rising 0.3 percentage points to 81.4%.
• North American airlines’ international demand rose 5.5% compared to August a year ago, up from 4% growth recorded in July and nearly double the five-year average of 3.1%. However, there are signs that inbound travel to the US is being negatively-impacted by the additional security measures now involved with travelling there. Capacity rose 3.9%, and load factor grew by 1.4 percentage points to 86.6%.
• Latin American airlines experienced a 9.3% demand increase in August compared to the same month last year. Although this was down from the 11.1% increase in July, it was still the strongest performance among regions. Capacity increased by 10.1% and load factor slid 0.6 percentage points to 82.7%, making the region the only one to see a decline in load factor. Traffic on the North-South America route has recovered in recent months, helped in part by signs of ongoing recovery in Brazil, the region’s largest economy. Meanwhile, international RPKs flown between North and Central America, as well as within South America, have also continued to trend strongly upwards.
• African airlines’ traffic climbed 6.4% in August. The continent’s two largest economies, Nigeria and South Africa, both exited from economic recessions during the second quarter of the year. Nonetheless, seasonally adjusted traffic has broadly tracked sideways so far this year. Capacity rose 3.4%, the smallest increase among regions, and load factor surged 2.1 percentage points to 75.7%.

Domestic Passenger Markets       

Demand for domestic travel climbed 7.6% in August compared to August 2016, on pace with the 7.5% growth recorded in July. Capacity rose 6.9% and load factor increased 0.6 percentage points to 84.5%. All markets reported demand increases with the exception of Australia.

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                      

• Indian airlines achieved a 36th consecutive month of double-digit traffic growth as demand rose 16%. Traffic continues to be stimulated by sizeable increases in the number of domestic routes served. 
• Brazil airlines’ domestic traffic climbed 5.5% year-on-year in August, up from 3.8% in the previous month. Amid signs that the economic recovery is continuing, domestic RPKs are trending upwards again, at an annualized pace of around 8%.

The Bottom Line:

Progress on the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) "One year ago, states came together under the leadership of the International Civil Aviation Organization (ICAO) to achieve a historic agreement to implement a market-based measure—CORSIA--that will support airlines’ efforts to stabilize emissions with carbon neutral growth. Even as we celebrate the CORSIA anniversary we are reminded by strong traffic growth that managing aviation’s carbon footprint is a major challenge. As an industry we are aligned and committed to carbon-neutral growth from 2020 and to cutting emissions to half 2005 levels by 2050. We will deliver on these commitments. The immediate challenge is to finalize details and preparations for CORSIA. But we must also intensify our partnership with governments to tackle other key contributors to meeting our commitments. Modernizing air traffic management and the commercialization of sustainable aviation fuels are at the top of the list," said de Juniac.            

View August passenger traffic analysis (pdf)