IATA: Rising fuel costs a worry

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SINGAPORE 9 July 2018: Air travel demand remains robust, but airlines face increases of around 27% in fuel costs this year compared with 2017,according to performance data for May, compiled by International Air Transport Association.

Rising fuel costs are negating the stimulus from lower fares, which could slow passenger traffic demand.

Global passenger traffic results for May showed demand (measured in revenue passenger kilometers, or RPKs) rising 6.1% compared to the same month in 2017, which was a slight pickup from 6.0% year-over-year growth for April 2018.

Capacity climbed 5.9% and load factor rose 0.1 percentage points to 80.1%.

“May was another solid month in terms of demand growth. As had been expected, we saw some moderation, as rising airline costs are reducing the stimulus from lower airfares. In particular, jet fuel prices are expected to be up nearly 26% this year compared to 2017. Nevertheless, the record load factor for the month signifies that demand for air connectivity is strong,” said, IATA’s director general and CEO Alexandre de Juniac.

International Passenger Markets

International passenger traffic demand rose 5.8%, which was up from 4.6% growth in April. All regions recorded growth, led by Asia-Pacific airlines. Total capacity climbed 5.4%, with load factor rising 0.3 percentage point to 78.7%.

Asia-Pacific airlines saw their traffic rise 8% in May compared to the year-ago period, slightly down on an 8.1% increase in April. Capacity increased 7.6%, and load factor edged up 0.3 percentages point to 77.9%. 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 travellers.

Europe

May demand climbed 6.2% over May 2017, well above the 3.4% year-over-year growth recorded in April.

Capacity rose 5.1% and load factor was up 0.8 percentage point to 83.5%, which was the highest among regions. Despite the impact of strikes in the region and mixed signals regarding the economic backdrop, traffic growth is healthy.

Middle East

May demand growth slowed to 0.8% compared to a year ago, from 2.9% annual growth recorded in April. The earlier timing of Ramadan this year may have affected the result, but more broadly, the upward trend in traffic has slowed compared to last year. May capacity increased 3.7%, and load factor fell 1.9 percentage points to 67.5%.

North America

Airline traffic rose 4.9% in May compared to May 2017, a strong rebound from 0.9% annual growth in April (which was a 36-month low). Capacity climbed 3.4% and load factor increased 1.2 percentage points to 82.0%. Given the comparatively strong US domestic economy, April’s weak demand performance likely was more reflective of unfavorable year-to-year comparisons with April 2017, when the current upsurge in growth began.

Latin America

Airlines experienced a 7.5% increase in traffic in May compared to the same month last year, which was up from 6.5% growth in April. Capacity climbed 7.0% and load factor rose 0.4 percentage points to 81.6%. Economic disruption in Brazil may be contributing to a slight slowdown in demand growth in recent months, but this is not expected to have a long-term impact on the healthy traffic trend.

African airlines

Traffic rose 3.8% in May compared to the year-ago period, which was an 8-month low. Capacity rose 3.2% and load factor edged up 0.4 percentage point to 66.4%. The region’s two largest economies, Nigeria and South Africa, may be moving in opposite directions again, with higher oil prices bolstering the Nigerian economy, while business confidence in South Africa has weakened again.