Passenger Demand Continues Strong Growth in May ; Air Freight Growth Continues to Grow Modestly in May, Up 4.2%

The International Air Transport Association (IATA) announced global passenger traffic results for May showing that demand (measured in revenue passenger kilometers, or RPKs) rose 6.1% compared to the same month in 2017, which was a slight pickup from 6.0% year-over-year growth for April 2018. Capacity climbed 5.9% and load factor rose 0.1 percentage point to 80.1%.

"May was another solid month in terms of demand growth. As had been expected, we saw some moderation, as rising airline costs are reducing the stimulus from lower airfares. In particular, jet fuel prices are expected to be up nearly 26% this year compared to 2017. Nevertheless, the record load factor for the month signifies that demand for air connectivity is strong," said Alexandre de Juniac, IATA’s Director General and CEO.      

   ¹% of industry RPKs in 2017   ²Year-on-year change in load factor   ³Load factor level   

International Passenger Markets

International passenger traffic demand rose 5.8%, which was up from 4.6% growth in April. All regions recorded growth, led by Asia-Pacific airlines. Total capacity climbed 5.4%, with load factor rising 0.3 percentage point to 78.7%.

• Asia-Pacific airlines saw their traffic rise 8.0% in May compared to the year-ago period, slightly down on an 8.1% increase in April. Capacity increased 7.6%, and load factor edged up 0.3 percentages point to 77.9%. Passenger traffic has continued to trend strongly upwards in seasonally-adjusted terms, buoyed by a combination of robust regional economic growth and increases in the number of route options for travelers.
• European carriers’ May demand climbed 6.2% over May 2017, well above the 3.4% year-over-year growth recorded in April. Capacity rose 5.1% and load factor was up 0.8 percentage point to 83.5%, which was the highest among regions. Despite the impact of strikes in the region and mixed signals regarding the economic backdrop, traffic growth is healthy.
• Middle East carriers’ May demand growth slowed to 0.8% compared to a year ago, from 2.9% annual growth recorded in April. The earlier timing of Ramadan this year may have affected the result, but more broadly, the upward trend in traffic has slowed compared to last year. May capacity increased 3.7%, and load factor fell 1.9 percentage points to 67.5%.
• North American airlines’ traffic rose 4.9% in May compared to May 2017, a strong rebound from 0.9% annual growth in April (which was a 36-month low). Capacity climbed 3.4% and load factor increased 1.2 percentage points to 82.0%. Given the comparatively strong US domestic economy, April’s weak demand performance likely was more reflective of unfavorable year-to-year comparisons with April 2017, when the current upsurge in growth began.
• Latin American airlines experienced a 7.5% increase in traffic in May compared to the same month last year, which was up from 6.5% growth in April. Capacity climbed 7.0% and load factor rose 0.4 percentage points to 81.6%. Economic disruption in Brazil may be contributing to a slight slowdown in demand growth in recent months, but this is not expected to have a long-term impact on the healthy traffic trend.
• African airlines’ traffic rose 3.8% in May compared to the year-ago period, which was an 8-month low. Capacity rose 3.2% and load factor edged up 0.4 percentage point to 66.4%. The region’s two largest economies, Nigeria and South Africa, may be moving in opposite directions again, with higher oil prices bolstering the Nigerian economy, while business confidence in South Africa has weakened again.

Domestic Passenger Markets       

Domestic demand rose 6.6% in May compared to May 2017, led by growth in China and India. This was down from the 8.6% year-on-year growth recorded in April largely owing to moderate growth in both countries, although each continued to post double-digit traffic gains.     

¹% of industry RPKs in 2017   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 traffic rose 16.6% year-over-year, which was down from 25.7% in April. Passenger volumes in India have fallen back in seasonally-adjusted terms in recent months alongside some mixed signals on the economic front. Notwithstanding this, May was India’s 45th consecutive month of double-digit annual RPK growth. Demand continues to be supported by strong growth in the number of airport connections within the country: some 22% more airport-pairs are scheduled to operate in 2018 compared to last year.
• US domestic traffic experienced a mild pick-up in May, with 5.5% year-over-year traffic growth, up from 5.3% in April. This partly offset the moderate growth in China and India. Domestic traffic is trending upward at an annualized rate of around 7%, helped by the comparatively strong US economy.

The Bottom Line

"Last month, IATA released its mid-year economic report showing expectations of an industry net profit of $33.8 billion. This is a solid performance. But our buffer against shocks is just $7.76. That’s the average profit per passenger that airlines will make this year—a narrow 4.1% net margin. And there are storm clouds on the horizon, including rising cost inputs, growing protectionist sentiment and the risk of trade wars, as well as geopolitical tensions. Aviation is the business of freedom, liberating people to lead better lives. Governments that recognize this will take steps to ensure aviation is economically sustainable. And aviation works best when borders are open to trade and people," said de Juniac.   

View full May passenger traffic analysis

Cargo

The International Air Transport Association (IATA) released data for global air freight markets showing that demand, measured in freight tonne kilometers (FTKs), rose 4.2% in May 2018, compared to the same period the year before. This was slightly down from the 5.2% (revised from 4.1%) growth in annual demand recorded in April 2018.

Freight capacity, measured in available freight tonne kilometers (AFTKs), grew by 6.2% year-on-year in May 2018. This was the fourth month in a row that capacity growth outstripped demand growth.

After a weak start to 2018, demand for global air freight has now resumed a modest trend upwards. However, the rapid growth seen in 2017 is now over, with demand growing at a significantly slower pace in 2018. In IATA’s mid-year industry outlook, 2018 freight growth was revised downwards to 4.0% (from the previously forecasted 4.5% in December 2017)

There are three indications that growth will continue at a slower pace:

• The re-stocking cycle which required quick delivery to meet customer needs is over
• The new export orders component of the global manufacturing Purchasing Managers’ Index (PMI) is at a 21- month low
• Global trade appears to be softening as trade tensions increase

"We expect air cargo demand to grow by a modest 4.0% in 2018. That’s an uptick from a very weak start to the year. But headwinds are strengthening with growing friction among governments on trade. We still expect demand to grow, but those expectations are dampened with each new tariff introduced. Experience tells us that trade wars, in the long run, only produce losers," said Alexandre de Juniac, IATA's Director General and CEO.   

¹% of industry FTKs in 2017   ²Year-on-year change in load factor   ³Load factor level              

Regional Performance    

All regions except Africa reported an increase in growth in May 2018.

• Asia-Pacific airlines saw freight demand increase in May 2018 to grow 4.9% compared to the same period last year. This was an increase over the 3.9% recorded the previous month. Capacity increased by 7.4%. As the largest freight-flying region, carrying close to 37% of global air freight, the risks from protectionist measures impacting the region are disproportionately high. That said, there are signs that demand is accelerating for international FTK’s.
• North American airlines’ freight volumes expanded 5.9% in April 2018 compared to the same period a year earlier. This was an increase in demand from the 4.6% rate of growth recorded the previous month. Capacity increased by 5.4%. The recent momentum of the US economy and the US dollar has helped strengthen demand for air imports. Data from the US Census Bureau shows a 12% year-on-year increase in imports by air in April, compared to 2.4% growth in March. 
• European airlines posted a 2.3% increase in freight volumes in May 2018. This was a slowdown from the 3.5% rate of growth the previous month. Capacity increased 6.0%. Seasonally-adjusted volumes rose slightly over the past two months; however, the annualized rate of growth over the past six months remains low at only 1.5%.
• Middle Eastern carriers’ freight volumes grew 2.4% in May 2018. This was a significant deceleration in demand of over 6.9% the previous month. The decrease mainly reflects developments from a year ago rather than a substantive change in the current freight trend. Seasonally-adjusted freight volumes continue to trend upwards at a comparatively modest pace by the region’s standards. This is consistent with signs of a broader moderation in global trade. Capacity increased 3.3%.
• Latin American airlines experienced growth in demand of 11.4% in May 2018 - the largest increase of any region for the third consecutive month. Capacity increased by 1.5%. The pick-up in demand over the last 18 months comes alongside signs of economic recovery in the region’s largest economy, Brazil. Seasonally-adjusted international freight volumes surpassed the May 2014 peak this month. 
• African carriers saw freight demand contract 2.0% in May 2018 compared to the same month last year. Capacity increased by 20.4%. After a surge in international FTK volumes last year, seasonally-adjusted international freight volumes have now trended downwards at an annualized pace of 15% over the past six months. This mainly reflects a softening in demand on markets to/from Asia and the Middle East.

View May air freight results (pdf)