Passenger demand strong in May despite fare hike warnings

July 06, 2018
IATA May travel demand strong.

Passenger demand remained strong in May despite a slew of predictions about fare increases and warnings about a global trade war.

Global demand rose 6.1 percent to May 2017 and planes flew marginally fuller with a 0.1 percent rise load factor to 80.1 percent, according to new figures from the International Air Transport Association.

Most airlines are now singing from the same hymn sheet when it comes to fare increases and rising fuel costs.  IATA last month said it expected an average global increase in fares of about 3 percent this year with jet fuel prices expected to be 26 percent higher than last year.

However, other estimates suggest the fare increases could be higher.

READ: Fares to rise as fuel increases hit profits.

Added to this was another warning IATA director general Alexandre de Juniac about rising trade tensions.

“Last month, IATA released its mid-year economic report showing expectations of an industry net profit of $33.8 billion,’’ de Juniac said.

“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.

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

Worldwide international passenger demand growth in May was 5.8 percent,  up from 4.6 percent in April.

WATCH: Scary take-off.

International traffic growth was strongest in the Asia-Pacific where demand grew by  8.0 percent with load factors continuing to rise.

“Passenger traffic has continued to trend strongly upwards in seasonally-adjusted terms, buoyed by a combination of robust regional economic growth and increases in the number of route options for travelers,’’ IATA said.

Traffic also rose in other regions with Europe up 6.2 percent, North America rising 4.9 per cent, Africa increasing 3.8 percent and Latin America experiencing a 7.5 increase in international traffic demand for May compared with last year.

The slowest growth was Middle East carriers at just 0.8 per cent, down from 2.9 percent in April.

IATA said an earlier Ramadan might have been a factor in the region’s slowdown “ but more broadly, the upward trend in traffic has slowed compared to last year”.

Domestic demand rose 6.6 percent globally, led by China (11.9 percent) and India (16.6 percent).

“Passenger volumes in India have fallen back in seasonally-adjusted terms in recent months alongside some mixed signals on the economic front,’’ IATA said. “Notwithstanding this, May was India’s 45th consecutive month of double-digit annual RPK growth

“Demand continues to be supported by strong growth in the number of airport connections within the country: some 22 percent more airport-pairs are scheduled to operate in 2018 compared to last year.”

The moderating growth in India and China was partially offset by a “mild pick-up” on domestic US routes of 5.5 percent, IATA said.

The perennial tail-end Charlie of IATA’s basket of domestic markets,  Australia, recorded 1.7 percent demand growth in May and a 2.5 percent increase in capacity.