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Terrorist attacks top list of global anxieties

Air travel is shifting down a gear as terrorism and a fragile global economy hit passenger demand, warns IATA.

After a robust start to 2016, there are ongoing signs that the global air passenger market is shifting down a gear.

A more moderate pace of demand growth is now foreseen by the International Air Transport Association (IATA) as a result of continuing terrorist activity and the fragile state of the global economy.

The recent shocks of the Istanbul airport attack and the economic fallout of Brexit make it difficult to see an early uptick, said IATA director-general Tony Tyler.

In a newly issued market analysis, the global airline industry body said the 6% year-on-year increase in industry-wide revenue passenger kilometres (RPKs) in the first five months of 2016 was aided by the leap year.

But even after correcting for the extra day in February, IATA estimated that traffic still grew by 5.3% in the year to date, in line with the average pace seen over the past decade.

Nonetheless, after a bumper year in 2015, the growth momentum of passenger traffic has weakened with the annual growth in RPKs remaining unchanged at 4.6% in May — the slowest pace since January 2015.

This can be attributed partly to the Brussels terrorist attacks, which affected the large international European market in April and May, but whose impact is expected to be only transitory in nature.

More significantly, the recent moderation in passenger growth reflects the ongoing fragile global economic backdrop.

Heightened post-Brexit uncertainty only increases the downside risks from the latter, IATA said.

Looking ahead, further stimulus is likely to come in the form of lower fares from the earlier decline in oil prices.

But this impact is likely to wane over the course of the year, IATA said.

Industry-wide load factor was 78.9% in the first five months of 2016 as a whole, 0.1 percentage points lower than in the same period of 2015.

April was the fourth straight month in which annual growth in available seat kilometres exceeded that of RPKs, mainly reflecting the easing in the latter.

Accordingly, while the seasonally adjusted i ndustry-wide l oad f actor has stabilised at around 80% in recent months, it has dropped by 1.2 percentage points since reaching an all-time high in November 2015.