November Air Freight Demand Reflects Strong Peak Season - Strong PAX Demand Growth Returns in November

The International Air Transport Association (IATA) released data for global air freight markets showing that demand, measured in freight tonne kilometers (FTKs), rose 6.8% in November 2016 compared to the year-earlier period. This was a slight slowdown from the 8.4% annual growth recorded in October 2016 - which was a 20-month high - but was still more than 2.5 times the average annual monthly growth rate of 2.6% over the past decade.

Growth in freight capacity, measured in available freight tonne kilometers (AFTKs), slowed to 4.4% November.

The uptick in freight growth coincides with an increase in the shipment of silicon materials typically used in high-value consumer electronics shipped by air, and an apparent turnaround in new export orders. A modal shift to air cargo following the collapse of the Hanjin Shipping Company in August may have also contributed. 

"Air cargo enjoyed a strong peak season in November. And there are encouraging signs that this growth will to continue into 2017, particularly with the shipment of high-value consumer electronics and their component parts. But, the trend in world trade is still stagnant. So it remains critically important for the air cargo industry to continue to improve its value offering by implementing modern customer-centric processes," 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

Airlines in all regions except Latin America reported an increase in year-on-year demand in November.

Asia-Pacific airlines saw demand in freight volumes grow 6.1% in November 2016 compared to the same period in 2015 and capacity grew by 4.0%. Seasonally-adjusted volumes are now back to the levels reached in 2010 during the post-global financial crisis bounce-back. The increase in demand is captured in the positive outlook from business surveys in the region.

North American carriers’ freight volumes expanded 5.6% in November 2016 compared to the same period a year earlier, and capacity increased by 2.6%. Freight traffic across the Atlantic continued to strengthen, increasing by 9.0% in October. This is being driven in part by an increase in westbound import flows from Europe to the US helped by a strong dollar. However US exports continue to suffer from the strength of the US dollar. 

European airlines posted a 9.0% year-on-year increase in freight demand in November. This was a slight slowdown compared to the 13.3% growth recorded in October, possibly attributable in part to the strike at Lufthansa. Notwithstanding this, the seasonally-adjusted growth trend is strong and corresponds with the sustained increase in export orders in Germany over the last few months and the ongoing weakness in the Euro. Capacity in the region increased by 4.8%.

Middle Eastern carriers enjoyed a boost in demand from the strong peak season with freight volumes increasing by 7.8% in November 2016, year-on-year. Seasonally-adjusted growth has slowed, however, mainly due to weak freight volumes between the Middle East and Asia, and the Middle East and Europe. Freight volumes grew by just 4% on these routes in the January-October 2016 period, compared with 8-11% over the same period in 2015. Capacity in the region increased by 5.1% in November.

Latin American airlines experienced a demand contraction of 1.3% in November 2016, compared to the same period last year. However in seasonally-adjusted terms growth levels are in-line with where they were at the start of 2016. The region continues to be blighted by weak economic and political conditions, particularly in the largest economy, Brazil. The ‘within South America’ market has been the weakest performer to date with volumes down nearly 20% compared to the same period in 2015. Capacity in the region decreased by 1.6% in November.

African carriers’ posted the largest increase in freight demand among the regions in November, 10.9% year-on-year, and the seasonally-adjusted growth remains strong. However, capacity surged by 26.9% on the back of long-haul expansion, particularly by Ethiopian Airlines, and this caused the freight load factor to fall in annual terms for the 19th consecutive month.

View November freight results (pdf)

Passenger

The International Air Transport Association (IATA) announced global passenger traffic results for November 2016 showing the strongest demand growth in nine months. Total revenue passenger kilometers (RPKs) rose 7.6% compared to November 2015. Capacity (available seat kilometers or ASKs) increased by 6.5%, and load factor rose 0.8 percentage points to 78.9%.

"Stronger demand for air travel reflects—and is supporting--a pick-up in the global economic cycle. 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," 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
November international passenger demand rose 8.0% 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 annualized 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%.     

Domestic Passenger Markets 
Domestic travel demand rose 7.1% in November 2016 compared to the same month in 2015, but results continued to vary widely, with China, India and Russia showing double-digit growth while demand declined in Brazil and Japan. Domestic capacity climbed 6.1%, and load factor improved 0.8 percentage points to 82.2%.

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               

• Air travel in Japan declined 0.5% in November. Traffic has trended sideways in seasonally-adjusted terms for the best part of two years, against a backdrop of weak momentum in consumer spending.
• Russia’s 15.5% increase largely reflects favorable comparisons with the year-earlier period following the collapse of Transaero in autumn 2015. But the recovery in seasonally-adjusted domestic traffic is continuing, alongside signs that the country’s economic recession is easing.

The Bottom Line:

"The airline industry continues to deliver strong results. 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," said de Juniac.

View full November passenger traffic analysis  (pdf)