Ahead of its annual general meeting in Seoul, which starts Saturday, the International Air Transport Association (IATA) reported that passenger demand rose in April, but it warned of ominous global economic factors that it says may be behind slowing year-over-year growth.
IATA Director General and CEO Alexandre de Juniac in his office at IATA Headquarters in Geneva,... [+]
“We experienced solid but not exceptional rising demand for air connectivity in April. This is partly is owing to the timing of Easter, but also reflects the slowing global economy,” said Alexandre de Juniac, IATA’s Director General and CEO. “Driven by tariffs and trade disputes, global trade is falling, and as a result, we are not seeing traffic growing at the same levels as a year ago. However, airlines are doing a very good job of managing aircraft utilization, leading to record load factors.”
Airline industry growth is closely tied to global economic performance and vulnerable to sudden shifts, operating on thin margins. Though the industry has enjoyed a remarkable decade of stability, following recovery from the 2008 global economic downturn, the industry is always on the lookout for the next big shock.
IATA Apr 2019 chart on industry growth (measured in RPKs) compared to the Global composite PMI... [+]
Europe at the lead
Europe’s airlines outperformed global peers with an international air traffic increase in April of 8% year-on-year, but it's not all good news for the continent.
“While this represented the strongest monthly growth since December, on a seasonally-adjusted basis, RPKs have only risen by 1% since November 2018, suggesting the global economic and trade backdrop – along with the uncertainty surrounding Brexit – is impacting demand,” IATA notes in its report.
North American Airlines saw demand rise by 5.2% in April of 2019, compared to last year.
“A strong domestic economy, low unemployment and a strong dollar are offsetting any impacts from current trade tensions,” IATA reports.
Latin American carriers also performed well with a 5.2% year-on-year rise in demand for April. Asia-Pacific and Middle East airlines saw traffic rise by 2.9% this month, compared to last year. April traffic increased by 1.1% over last year for African Airlines.
Planes are generally more crowded
IATA's report of Global Passenger Load Factors, April 2019, including reference to historic highs... [+]
IATA’s results also show strong performance in passenger load factors globally, with an average of 82.8%. Europe’s airlines are gaining the most utilization from their aircraft assets, with 85.1% passenger load factor (PLF) levels. North American airlines follow with an 83.9% PLF, and Latin American is third with 82.2% PLF.
The Asia Pacific region is the only global region to experience a year-on-year percentage drop in load factors, down -0.9% PLF to 81.7%.
“Results largely reflect the slowdown in global trade, including the impact from the China-US trade tensions on the broader region, which continue to weigh on passenger demand,” IATA states.
US Domestic Market remains strong
The U.S. domestic passenger market, which represents 14.1% of the world’s domestic traffic, performed well with 4.1% rise in revenue passenger kilometers (RPKs) as a measure of demand and 3.8% rise in available seat kilometers (ASKs) as a measure of capacity in April. The load factor also rose slightly (0.2%) to 84.7% on domestic flights.
Russia outperforms the U.S. and all other domestic markets with a year-on-year rise of 10.4% in both RPKs and KPIs, with PLF unchanged at 81%. However, the Russian domestic market is significantly smaller than the U.S. despite geography, accounting only for 1.4% of the world’s domestic market.
China’s much larger domestic market—representing 9.5% of worldwide domestic traffic—is showing some signs of strain from the U.S.-China trade dispute.
“China’s domestic traffic increased 3.4% in April, up from 2.8% in March, but still well below the 2016-2018 period when growth averaged around 12%, reflecting the impact of the US-China trade dispute and softening in a number of economic indicators,” IATA states.
Besides the disruption to international services, the collapse of Jet Airways was felt in India’s domestic performance. “India’s airlines’ traffic actually fell 0.5% year-over-year, reflecting the impact of the shut-down of Jet Airways,” IATA reports. “This marked the first time in six years that monthly domestic traffic declined compared to the year-ago period.”
Global headwinds
IATA’s Passenger Market Analysis for April 2019 also warns of key indicators of headwinds for the airline industry resulting from the global economic outlook and business confidence indices.
IATA Apr 2019 report on Economic conditions including monthly data from composite PMIs as a measure... [+]
“The global composite Purchasing Managers Index (PMI) – a very good leading indicator of RPK growth in the past – remains well below its level of 2017 and 2018 and slipped further this month,” IATA sates. “At the country level, business confidence remains generally more supportive for the world’s emerging markets than is the case for the major advanced economies. In addition, the OECD (Organization for Economic Cooperation and Development) recently revised its forecast for 2019 global GDP growth downward to 3.2%, noting a sharp slowdown in late 2018, with growth now stabilizing at a ‘moderate’ level. The OECD’s downgrade follows that of the IMF (International Monetary Fund) noted last month. Given expectations of a less supportive economic backdrop over the course of 2019, the passenger demand outlook has likewise become somewhat less favorable than was expected six months ago.”
Whether these headwinds can be managed or herald severe turbulence will be a key topic of discussion during the IATA AGM in Seoul.
