UPDATE: IATA sees September pax demand below average growth, cargo remains weak

The International Air Transport Association (IATA) announced global passenger traffic results for September 2019 showing that demand (measured in revenue passenger kilometres or RPKs) climbed 3.8 percent compared to the same month last year, broadly unchanged from August’s performance. Capacity (available seat kilometres or ASKs) increased by 3.3 percent, and load factor climbed 0.4 percent percentage point to 81.9 percent, which was a record for any September. Alexandre de Juniac, director general of IATA. “September marked the eighth consecutive month of below average demand growth. Given the environment of declining world trade activity and tariff wars, rising political and geopolitical tensions and a slowing global economy, it is difficult to see the trend reversing in the near term,” said Alexandre de Juniac, IATA’s director deneral and CEO. IATA also reported that global air freight demand, measured in freight tonne kilometres (FTKs), decreased by 4.5 percent in September 2019, compared to the same period in 2018. This marks the 11th consecutive month of year-on-year decline in freight volumes, the longest period since the global financial crisis in 2008. Freight capacity, measured in available freight tonne kilometres (AFTKs), rose by 2.1 percent year-on-year in September 2019. Capacity growth has now outstripped demand growth for the 17th consecutive month. Air cargo continues to suffer from: The intensifying trade war between the US and China, and South Korea and Japan; The deterioration in global trade; Weakness in some of the key economic drivers. Global export orders continue to fall. The Purchasing Managers Index (PMI) tracking new manufacturing export orders has pointed to falling orders since September 2018. “The US-China trade war continues to take its toll on the air cargo industry. October’s pause on tariff hikes between Washington and Beijing is good news. But trillions of dollars of trade is already affected, which helped fuel September’s 4.5% year-on-year fall in demand.  And we can expect the tough business environment for air cargo to continue,” said IATA’s de Juniac. International Passenger Markets: September international passenger demand rose 3 percent, compared to September 2018, which was a decline from 3.6 percent year-over-year growth achieved in August. All regions recorded traffic increases, led by airlines in North America. Capacity climbed 2.6 percent, and load factor edged up 0.3 percentage point to 81.6 percent. International Cargo Performance: Airlines in Asia-Pacific, Europe, North America and the Middle East suffered sharp declines in year-on-year growth in total air freight volumes in September 2019, while Latin America carriers experienced a more moderate decline. Africa was the only region to record growth in air freight demand compared to September last year. Domestic Passenger Markets: Demand for domestic travel climbed 5.3 percent in September compared to September 2018, which was an improvement over the 4.7 percent annual growth recorded in August. Capacity rose 4.7 percent and load factor increased 0.5 percentage point to 82.3 percent. Asia-Pacific airlines saw September passenger traffic increase 3.6 percent compared to the year-ago period, an increase over the 3.3 percent annual growth recorded in August. Growth remains well below that seen in 2018. This is occurring amid a weaker economic backdrop in some key states, trade tensions between the US and China and between Japan and South Korea. Political unrest in Hong Kong has contributed to subdued regional demand and led to capacity cuts. Capacity rose 5 percent and load factor slid 1.1 percentage points to 78.2 percent. CARGO: Asia-Pacific airlines saw demand for air freight contract by 4.9 percent in September 2019, compared to the same period in 2018. The US-China and South Korea-Japan trade wars along with the slowdown in the Chinese economy have significantly impacted this region. More recently, the disruption to operations at Hong Kong International Airport – the largest cargo hub in the world – added additional pressure. With the region accounting for more than 35 percent of total FTKs, this performance is the major contributor to the weak industry-wide outcome. Air freight capacity increased by 2.7 percent over the past year. European carriers experienced a 2.9 percent rise in September traffic, the region’s weakest performance this year and a decline from the 4.2 percent year-over-year rise recorded in August. In addition to slowing economic activity and faltering business confidence in many of the key European economies, the result was also affected by the demise of a number of airlines, along with pilot strikes. Capacity rose 2.5 percent, and load factor climbed 0.3 percentage point to 86.9 percent, which was the highest among regions. CARGO: European airlines posted a 3.3 percent decrease in freight demand in September 2019 compared to the same period a year earlier. Weaker manufacturing conditions for exporters in Germany, softer regional economies, and ongoing uncertainty over Brexit, have impacted the recent performance. Capacity increased by 3.3 percent year-on-year. Middle Eastern airlines posted a 1.8 percent traffic increase in September, which was a slowdown from a 2.9 percent rise in August. Capacity was up just 0.2 percent, with load factor climbing 1.2 percentage points to 75.2 percent. International traffic growth continues to be affected by a mix of structural challenges in some of the region’s large airlines, geopolitical risks and weaker business confidence in some countries. CARGO: Middle Eastern airlines’ freight volumes decreased 8 percent in September 2019 compared to the year-ago period. This was the sharpest drop in freight demand of any region. Capacity decreased by 0.4 percent. Escalating trade tensions and the slowing in global trade have affected the region’s performance due to its strategic position as a global supply chain link. Most key routes to and from the region have seen weak demand in the past few months. The large Europe to Middle East and Asia to Middle East routes were down 8 percent and 5 percent respectively in August (last data available) compared to a year ago. North American carriers’ international demand climbed 4.3 percent compared to September 2018, well up from the 2.9 percent growth recorded in August and the strongest performance among the regions. Capacity rose 1.6 percent, and load factor accelerated 2.2 percentage points to 83 percent. Demand is being supported by solid consumer spending and continued job creation. CARGO: North American airlines saw demand decrease by 4.2 percent in September 2019, compared to the same period a year earlier. Capacity increased by 1.9 percent. The US-China trade war and falling business confidence continue to weigh on the region’s carriers. Freight demand has contracted between North America and Europe and between Asia and North America. Latin American airlines had a 1.2 percent demand increase in September compared to a year ago, which was down from 2.3 percent growth in August. Capacity fell 1.6 percent and load factor surged 2.3 percentage points to 82.5 percent. Latin American carriers continue to face several challenges including some weaker economic and business confidence outcomes, political and social unrest in key states, and currency exposure to the strengthening US dollar. CARGO: Latin American airlines experienced a decrease in freight demand in September 2019 of 0.2 percent compared to the same period last year and a capacity decrease of 2.9 percent. Despite indications of a recovery in the Brazilian economy, deteriorating conditions elsewhere in the region along with a slowing in global trade have impacted the region’s performance. African airlines’ traffic climbed 0.9 percent in September, a steep fall-off from the 4.1 percent growth recorded in August. Looking through the recent volatility in the numbers, however, traffic growth for the third quarter of 2019 remains solid at around 3 percent year-over-year. Capacity rose 2.5 percent, however, and load factor dipped 1.1 percentage points to 71.7 percent. CARGO: African carriers posted the fastest growth of any region in September 2019, with an increase in demand of 2.2 percent compared to the same period a year earlier. This was a significant slowdown in growth from the 8 percent recorded in August. Strong trade and investment linkages with Asia and robust economic performance in some key regional economies contributed to the positive performance. Capacity grew 9.4 percent year-on-year.