Passenger demand continues strong growth in May

Global passenger demand (measured in revenue passenger kilometers, or RPKs) continued its strong growth in May, rising 6.1 percent versus the same month in 2017, according to the latest data from the International Air Transport Association (IATA).

Capacity climbed 5.9 percent and load factor rose 0.1 percentage point to 80.1 percent.

“May was another solid month in terms of demand growth,” according to Alexandre de Juniac, IATA’s Director General and CEO.

“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 percent this year compared to 2017. Nevertheless, the record load factor for the month signifies that demand for air connectivity is strong,” he confirmed.

International passenger traffic demand rose 5.8 percent and all regions recorded growth, led by Asia-Pacific airlines. Total capacity climbed 5.4 percent, with load factor rising 0.3 percentage point to 78.7 percent.

Asia-Pacific airlines saw their traffic rise 8.0 percent while capacity increased 7.6 percent, and load factor, 0.3 percentages point to 77.9 percent.

Passenger traffic has continued to trend strongly upwards in seasonallyadjusted terms, buoyed by a combination of robust regional economic growth and increases in the number of route options for travelers.

Middle East carriers’ May demand growth slowed to 0.8 percent compared to a year ago, from 2.9 percent 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 percent, and load factor fell 1.9 percentage points to 67.5 percent.

North American airlines’ traffic rose 4.9 percent in May compared to May 2017, a strong rebound from 0.9 percent annual growth in April (which was a 36month low).

Capacity climbed 3.4 percent 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 percent increase in traffic in May compared to the same month last year, which was up from 6.5 percent growth in April.

Capacity climbed 7.0 percent and load factor rose 0.4 percentage points to 81.6 percent. 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.

European carriers’ May demand climbed 6.2 percent over May 2017, well above the 3.4 percent year-over-year growth recorded in April.

Capacity rose 5.1 percent 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.

African airlines’ traffic rose 3.8 percent in May compared to the year-ago period, which was an 8-month low.

Capacity rose 3.2 percent and load factor edged up 0.4 percentage point to 66.4 percent. 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.

“Last month, IATA released its midyear 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 percent net margin,” De Juniac pointed out.

“Storm clouds are on the horizon, including rising cost inputs, growing protectionist sentiment and the risk of trade wars, as well as geopolitical tensions,” he warned.

“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.”