October Passenger Demand Moderates; Air Freight Demand Up 8.2% Fastest Growth in 18 months

The International Air Transport Association (IATA) announced global passenger traffic results for October showing that demand (measured in revenue passenger kilometers, or RPKs) rose 5.8% compared to the same month last year. Capacity grew 6.3% and load factor slid 0.4 percentage points to 80.1%.

October’s performance was a slow-down on the 7.1% year-on-year growth rate recorded in September but still was broadly in line with 10-year averages. Domestic and international travel growth largely was in balance.

"Passenger demand growth in October was consistent with long-term trends but represented a deterioration compared to September. While the negative traffic impact from terror attacks and political instability in parts of the world has receded, the long downward trend in yield—which helped to stimulate travel--has leveled off. Furthermore, the recent OPEC agreement to restrict oil production suggests fuel prices have ended their slide," 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
October international passenger demand rose 5.9% compared to October 2015. Airlines in all regions recorded growth. Total capacity rose faster, up 6.6%, causing load factor to slide 0.6% percentage points to 78.6%.

• Asia-Pacific airlines’ traffic rose 7% in October compared to the year-ago period. Capacity rose 7.1% and load factor dipped 0.1 percentage point to 76.9%. The strong upward trend in seasonally-adjusted traffic has slowed in recent months, although it is too soon to determine whether this is an actual weakening or just a brief pause. On the other hand the Asia-to-Europe market, which is highly sensitive to shock events, is continuing to recover.
• European carriers saw October demand climb 5.7% over October 2015. Capacity increased 6.2% and load factor slipped 0.4 percentage points to 83.2%. International demand for European carriers appears to be returning to normal after the disruption caused by terrorism and political instability earlier this year.
• Middle East carriers experienced a 7% rise in demand in October, the slowest pace for the region in 18 months, although perhaps the timing of regional celebrations could have affected the results. Capacity increased 10%, however, with the result that load factor dropped 2.0 percentage points to 70.1%, its lowest level for the month of October since 2006.
• North American airlines’ traffic climbed 2.4% in October compared to the year-ago period. While this was the lowest among the regions, on a seasonally-adjusted basis, passenger volumes have still risen at an annualized rate of around 5% since March. Capacity rose 4.9% and load factor dropped 1.9 percentage points to 80.1%.
• Latin American airlines had a 7.1% increase in traffic in October, supported by robust demand for international traffic within the region. Capacity climbed at a much slower rate of 2.1%, causing load factor to surge 4 percentage points to 84.3%, highest among the regions.
• African airlines’ traffic growth slowed to 5.8% year-on-year in October, from 9.1% in September. Economic conditions in parts of the continent remain challenging. Capacity rose 4.3%, and load factor strengthened to 68.8%, up 1 percentage point.

Domestic Passenger Markets 

Domestic demand climbed 5.6% in October compared to October 2015, which was matched by a similar increase in capacity. There was continued wide variation in individual country results, with India and China enjoying double-digit growth rates while other markets experienced much slower growth and Brazil remained in decline.

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        

• India’s domestic market soared 22.7% year-on-year in October, supported by significant growth in real consumer spending and increases in the number of airport pairs served.
• China’s traffic jump of 14.1% in October was attributable to similar factors—although flight frequencies actually have fallen year-to-year.

View full October passenger traffic analysis (pdf)

Cargo

The International Air Transport Association (IATA) released data for global air freight markets in October 2016 showing that demand, measured in freight tonne kilometers (FTKs), rose 8.2% year-on-year in October. This was the fastest pace of growth seen in 18 months. Freight capacity, measured in available freight tonne kilometers (AFTKs), increased 3.6% over the same period.

"Global air freight markets look set to end 2016 on a high note. Demand is growing at its fastest pace in 18 months. It remains to be seen how long this growth trend will endure after the year-end peak period and we still face headwinds from weak global trade. But there are some encouraging signs. The peak has been stronger than expected. And purchasing managers are reporting a pick-up in new export orders. So we will enter 2017 propelled by some much-needed positive momentum," said Alexandre de Juniac, IATA’s Director General and CEO.

Some one-off factors are likely impacting October’s positive results: (1) there is potential modal shift to air cargo following the collapse of the Hanjin Shipping Company in August and (2) there could be some last minute reliance on air transport as companies exercised caution in ordering as a result of weak market conditions earlier in the year.

Structural market shifts are also likely underpinning a portion of the stronger performance. This includes strong growth in cross-border e-commerce and pharmaceutical flows. Preparation for the increasing popularity of sales events such as Black Friday and Cyber Monday may also have contributed to the increased demand peak.

"The drivers of stronger growth are sending a major signal for change to the air cargo industry. Whether it is e-commerce or the trade in pharmaceuticals, shippers are demanding more than current paper processes can support. The shift to e-freight is more critical than ever," said de Juniac  

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 October. However results continued to vary considerably.

• Asia-Pacific airlines saw demand in freight volumes both from the ‘Within Asia’ air cargo market as well as on routes to and from the region increase in October 2016 compared to the same period last year. Regional demand increased 7.8% and capacity grew by 3.9%. International freight volumes expanded 8.0% in October, contributing to an annualized increase, in seasonally adjusted terms, of 15% since March 2016.
• North American carriers’ freight volumes expanded 3.7% in October 2016 compared to the same period last year, and capacity increased by just 0.1%. International freight volumes increased by 7.2% in October – their fastest pace since the disruption at US seaports in February last year. Seasonally-adjusted freight volumes are back to the levels reached since the post-global financial crisis bounce-back in 2010. US exports continue to suffer from the strength of the US dollar which has kept the US export market under pressure.
• European airlines posted the largest increase in freight demand of all regions in October, 13.4% year on year. Capacity increased 5.9%. October’s positive performance corresponds with the sustained increase in export orders in Germany over the last few months and the ongoing weakness in the Euro. International freight demand grew by 13.2% year-on-year in October – the fastest pace since April 2011 – and the upward trend in seasonally-adjusted traffic was very strong.
• Middle Eastern carriers saw air freight demand increase by 9.2% in October 2016 year-on-year, marking an improvement over the last few months’ performance. However seasonally-adjusted growth has slowed, predominantly due to weak freight volumes between the Middle East and Asia, and the Middle East and North America. Capacity in the region increased by 4.2%.
• Latin American airlines experienced a demand contraction of 0.1% in October 2016, compared to the same period last year, while capacity decreased by 1.8%. International freight volumes grew by 0.2%. In seasonally-adjusted terms this is an improvement over the last few months. The region continues to be blighted by weak economic and political conditions, particularly in the region’s largest economy, Brazil.
• African carriers’ freight demand increased by 7.4% in October 2016 compared to the same month last year. However, capacity surged by 24.7% on the back of long-haul expansion, in particular by Ethiopian Airlines. International freight demand for African airlines slowed in October, but still remained robust at 7.7% year-on-year.

View October freight results (pdf)