IATA: Strong passenger demand and record load factors the standouts of positive annual industry performance

2 February, 2018

Full calendar year metrics from the International Air Transport Association (IATA) show global passenger traffic demand (revenue passenger kilometres or RPKs) in 2017 rose +7.6% compared to 2016. This is well above the 10-year average annual growth rate of +5.5%. Full year 2017 capacity rose +6.3%, and load factor climbed 0.9 percentage points to a record calendar-year high of 81.4%.

While latest figures for Dec-2017 may show a slowing of growth to +6.2% compared to Dec-2016, this is largely explained by less favourable comparisons to the even stronger growth trend seen in the year-ago period. As a whole 2017 started very strongly and largely stayed that way throughout the year, sustained by a broad-based pick-up in economic conditions.

CHART - Passenger growth in 2017 was supported by a broad based pick-up in global economic conditions as well as stimulus from lower airfares (mainly earlier in the year). Lower fares have provided a strong tailwind to passenger demand since late-2014, and have helped to drive the RPK/GDP multiplier above its long-run median level for three years in a rowSource: IATA Air Passenger Market Analysis

However, like CAPA - Centre for Aviation's own forecast reported by The Blue Swan Daily last week, IATA warns that while the underlying economic outlook remains supportive in 2018, rising cost inputs, most notably fuel, suggest we are unlikely to see the same degree of demand stimulation from lower fares that occurred in the first part of 2017 and performance through the full year.

CHART - Global passenger traffic is carrying solid momentum into 2018 and IATA forecasts 2018 to be another year of above-trend growth for industry-wide RPKs, driven by an ongoing supportive economic backdrop, albeit growth will be slightly slower than 2017Source: IATA Air Passenger Market Analysis

"Aviation can do even more in 2018, supported by governments that recognise and support our activities with smarter regulation, fairer taxation, cost efficient infrastructure and borders that are open to people and trade," says Alexandre de Juniac, director general and CEO, IATA.

International passenger traffic soared +7.9% compared to 2016, according to the IATA data, faster than the +6.4% capacity rise and driving load factor up 1.1 percentage points to 80.6%. All regions recorded year over year increases in demand, led by the Asia-Pacific and Latin America regions, where the low cost model is certainly playing an increasingly influential role.

Looking across the world by region:

  • Asia Pacific carriers posted annual demand growth of +9.4%, compared to 2016, driven by robust regional economic expansion and an increase in route options for travellers. This was the first time since 1994 that Asia Pacific led all the regions in annual growth rate. Capacity rose +7.9%, and load factor climbed 1.1 percentage points to 79.6%.
  • European carriers' international traffic climbed +8.2% in 2017 compared to the previous year, underpinned by buoyant economic conditions in the region. Capacity rose +6.1% and load factor surged 1.6 percentage points to 84.4%, which was the highest for any region.
  • Middle East carriers' traffic increased +6.6% last year. The region was the only one to see a slowdown in annual growth compared to 2016, and the region's share of global traffic (9.5%) fell for the first time in 20 years. The market segment to/from North America was hit the hardest, reports IATA, owing to factors including the temporary ban on large portable electronic devices in the aircraft cabin as well as the proposed US travel bans affecting some countries in the region. Capacity climbed +6.4% and load factor rose 0.1 percentage point to 74.7%.
  • North American airlines had their fastest demand growth since 2011, with full year traffic rising +4.8% compared to 2016. Capacity climbed +4.5%, and load factor edged up 0.3 percentage point to 81.7%. The comparatively robust economic backdrop supported outbound passenger demand. This was somewhat offset by a slowdown in inbound travel partly attributable to the new immigration and security restrictions put in place for travel to the US, as well as the extreme weather events that hit the US later in the year.
  • Latin American airlines' traffic climbed +9.3% in 2017, the fastest rate since 2011. However, the upward trend weakened towards the end of the year, partly owing to disruption caused by the severe 2017 hurricane season that also hurt travel to the US. Capacity rose +8.0% and load factor increased 1.0 percentage point to 82.1%, second highest among the regions.
  • African airlines saw 2017 traffic rise +7.5% compared to 2016. Capacity rose at less than half the rate of demand (+3.6%), and load factor jumped 2.5 percentage points to 70.3%. While indicators in South Africa are consistent with falling economic output, Nigeria has returned to growth, helped by the recent rise in oil prices.

[perfectpullquote align="full" cite="" link="" color="" class="" size=""] "Last year, more than 4 billion passengers used aviation to reunite with friends and loved ones, to explore new worlds, to do business, and to take advantage of opportunities to improve themselves. The connectivity provided by aviation enables goods to get to markets, and aid to be delivered to those in need. Aviation truly is the business of freedom, liberating us from the restraints of geography to lead better lives."

Alexandre de Juniac, Director General and CEO, IATA [/perfectpullquote]

Domestic air travel climbed +7.0% last year, reports IATA with all the major markets showing annual growth led by India (+17.5%), China (+13.3%), and Russia (+10.1%) reporting the largest rises in traffic. Total capacity increased +6.2%, helping to drive up load factors to 83.0%, up 0.7% percentage point compared to 2016.

Alongside the double-digit rises, Japan posted its fastest full year of growth (up +5.8%) since 2013, driven in part by the country's stronger economic backdrop. Brazil's domestic traffic also returned to growth last year with a +3.5% demand increase, after recording an annual decline of -5.5% in 2016.

CHART - Comparisons with 2016 shows that the rates of domestic growth slowed in India, USA and AustraliaSource: IATA Air Passenger Market Analysis

IATA estimates that the domestic growth rates were driven mainly by the comparatively strong rates of economic expansion seen in each country, as well as stimulus from additional airport pairs being offered. This was especially evident in Russia where around 40% of the 10.1% acceleration of the domestic market can be explained by the improvement in economic conditions.

IATA has produced an infographic to highlight the key 2017 performance parameters ( CLICK LINK to view in detail: INFOGRAPHIC - 2017 in review - air passenger volumes)...