IATA Reports Solid Demand Growth Continues

airlineDemand for air travel recorded another solid month of growth in July, the International Air Transport Association (IATA) reports. Overall revenue passenger kilometers (RPKs) were up 5.0 percent compared to July 2012. All regions were up year-on-year, with emerging markets recording the strongest increases, IATA reports. Capacity rose 5.5 percent on the previous July, ahead of demand, and industry load factor dropped 0.4 percentage points to 82.4 percent.

Although July’s 5.0 percent performance was not as strong as June’s (6.1%), this likely reflects both a market correction in line with prevailing economic conditions as well as the impact of reduced travel in markets observing the Ramadan period,, IATA reports.

“Passenger demand continues to be strong. But the story of emerging markets driving growth as developed economies stagnate could be shifting. We are still expecting growth of 5 percent this year. How that growth is achieved, however, appears to be at a turning point,” said Tony Tyler, IATA’s director general and CEO.

“The emergence of the Eurozone from an 18-month recession provided the biggest boost to traffic over recent months. In contrast, the deceleration of the Chinese economy has been a dampener on air travel,  with weakness showing up throughout emerging Asian markets. The price of oil, a huge cost item for airlines, is tracking political tensions in the Middle East. Along with the global cost impact of this, at the regional level there is the potential for disruption for one of aviation’s strongest and most consistent growth markets,” said Tyler.

July international passenger traffic climbed 5.1 compared to the year-ago period. Capacity rose slightly faster at 5.4 percent, causing load factor to slip 0.2 percentage points to 82.7 percent. Performance across all regions was positive, IATA said. 

North American airlines’ international traffic rose 3.6 percent in July versus the same month last year, while capacity climbed 2.9 percent, pushing load factor up 0.6 percentage points to 87.4 percent, highest for any region. Latest indicators show July business confidence reaching levels not seen since March, with consumer confidence also showing improvement at the end of the second quarter, IATA said. 

Domestic Passenger Markets: With the exception of Brazil all domestic markets experienced demand growth in July, but rates among countries varied significantly. Total traffic climbed 4.8 percent but this was exceeded by a 5.8 percent rise in capacity and load factor slipped to 82 percent. 

The US domestic market was up 1.5 percent in July compared to a year ago, a decline on the 2.4 percent growth in June and below the year-to-date average of 1.9 percent which reflected stronger growth before the impact of government spending cuts. Capacity rose 2.2 percent and load factor dipped 0.6 percentage points but still led the industry at 86.6 percent.

“Economic growth and connectivity go hand in hand. Indeed, connectivity creates jobs and supports growth," said Tyler.

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