Air Freight Up 5.9% in October; Signals Strong Start to Q4 : October Passenger Demand Rebounds from Weather-Impacted September

- Quebec, Canada

The International Air Transport Association (IATA) released data for global air freight markets showing that demand, measured in freight tonne kilometers (FTKs), rose 5.9% in October 2017 compared to the year-earlier period. This was a slowdown from the 9.2% annual growth recorded in September 2017 but still exceeded the average annual growth rate of 3.2% over the past decade.

Freight capacity, measured in available freight tonne kilometers (AFTKs), rose by 3.7% year-on-year in October. This was the 15th consecutive month in which demand growth outstripped capacity growth, which is positive for load factors, yields, and financial performance.

While cargo demand remains strong, several indicators show that we may have passed the growth peak. The inventory-to-sales ratio in the US is tracking sideways, indicating that the period when companies look to restock inventories quickly—which often gives air cargo a boost—has ended. The new export orders component of the global Purchasing Managers’ Index (PMI) is stable. And the upward trend in seasonally-adjusted freight volumes has moderated.

Freight volumes are still expected to grow in 2018, although at a slower pace than in 2017.

"Demand for air freight grew by 5.9% in October.  And tightening supply conditions in the fourth quarter should see the air cargo industry deliver its strongest operational and financial performance since the post-global financial crisis rebound in 2010," said Alexandre de Juniac, IATA’s Director General and CEO. 

October 2017
(% year-on-year)

World share¹

FTK

AFTK

FLF     
(%-pt)²     

FLF
(level)³  

Total Market        

100.0%     

5.9%

3.7%    

1.0%      

46.9% 

Africa

1.6%

30.3%

9.2%

4.3%

26.8%

Asia Pacific

37.4%

4.4%

3.9%

0.3%         

56.0%

Europe             

23.5%             

6.4%

2.5%       

1.8%         

48.7%             

Latin America             

2.8%

7.2%

4.4%

1.0%

37.5%

Middle East             

13.9%

4.6%

3.4%

0.6%

47.2%

North America            

20.8%

6.6%

3.8%

1.0%

37.9%

¹% of industry FTKs in 2016   ²Year-on-year change in load factor   ³Load factor level              

Regional Performance    

Airlines in all regions reported an increase in total year-on-year demand in October. However, in contrast, international freight growth slowed in all regions except Africa.

  • Asia-Pacific airlines saw freight volumes increase by 4.4% and capacity expanded by 3.9% in October 2017, compared to the same period last year. Demand for freight is now around 3% higher than the peak reached in the post-financial crisis rebound in 2010. The region’s manufacturers continue to enjoy buoyant order books. And the major exporters in China and Japan are reporting growing backlogs supported in part by stronger economic activity in Europe.
  • North American carriers posted an increase in freight volumes of 6.6% for October. This was a slowdown from the 7.4% recorded in September but still ahead of the five-year average pace of growth. Capacity increased 3.8%. The strength of the US economy and the US dollar has boosted the inbound freight market in recent years. Data from the US Census Bureau shows an 11.6% year-on-year increase in air imports to the US in the first nine months of 2017, compared to a slower rise in export orders of 6.5%.
  • European airlines posted a 6.4% increase in freight demand in October 2017. This was a marked slowdown from the 10.6% growth in demand in September, however it was still above the five year average of 9.0%. Capacity increased 2.5%. Concerns that the recent strengthening of the euro might have affected the region’s exporters have not materialized yet. Europe’s manufacturers’ export orders are growing at their fastest pace in more than seven years. Freight demand remains very healthy on transatlantic routes and is strong on routes to and from Asia - having received a boost in trade from the economic stimulus measures put in place by China. 
  • Middle Eastern carriers’ year-on-year freight volumes increased 4.6% in October and capacity increased 3.4%. During the same period international freight volumes slowed to 4.7% from 9.2% the previous month. The recent volatility produced by the region in the year-on-year growth rate for international freight volumes is due to developments in demand in 2016 rather than a marked change in the current traffic trend. In fact, seasonally-adjusted international freight volumes have continued to trend upwards at a rate of 8-10% over the past six months.
  • Latin American airlines experienced a growth in demand of 7.2% in October and a capacity increase of 4.4% compared to the same period in 2016. International freight volumes rose by 7.7% over the same period. This is nearly nine times the five-year average rate of 0.9%. The pick-up in demand reflects signs of recovery in the region’s largest economy, Brazil. Seasonally-adjusted international freight volumes are now back to the levels seen at the end of 2014.
  • African carriers posted the largest year-on-year increase in demand of all regions in October, with freight volumes rising 30.3%. Capacity increased 9.2%. During the same period international freight volumes grew by 28.5%. This is more than three times the five-year average growth pace of 9.4%. Demand has been boosted by very strong growth on the trade lane to and from Asia, which increased by more than 67% in the first nine months of the year. 

Passenger

The International Air Transport Association (IATA) announced global passenger traffic results for October showing that demand (measured in revenue passenger kilometers, or RPKs) rose 7.2% compared to the same month last year. Capacity grew 6.2% and load factor climbed 0.8 percentage points to 80.8%, which was a record for the month.

October’s performance was a strong bounce-back after the hurricane-related disruptions in September. Domestic and international travel growth largely was in balance.

"As expected, the recent severe weather in the Americas region had only a temporary impact on the healthy travel demand we have seen this year, and we remain on course for another year of above-trend growth," said Alexandre de Juniac, IATA’s Director General and CEO.

October 2017
(% year-on-year)

World share¹

RPK

ASK

PLF
(%-pt)²         

PLF
(level)³  
        

Total Market

100.0%

7.2%

6.2%

0.8%      

80.8%

Africa

2.2%

5.7%

2.2%

2.4%

71.9%

Asia Pacific

32.9%      

10.1%

8.9%

0.8%

80.2%

Europe

26.4%

6.3%

4.5%

1.4%

84.3%

Latin America

5.2%

6.7%

4.9%      

1.4%

82.5%

Middle East

9.6%

6.8%

5.4%      

0.9%

69.4%

North America

23.8%      

4.8%      

5.3%

-0.4%

83.3%

   ¹% of industry RPKs in 2016   ²Year-on-year change in load factor   ³Load factor level   

International Passenger Markets

October international passenger demand rose 7.3% compared to October 2016, which was an improvement compared to the 6.6% demand increase for September. Airlines in all regions recorded growth. Total capacity climbed 6.0%, and load factor increased 1.0 percentage point to 79.4%.

  • Asia-Pacific airlines led all regions with traffic growth of 10.3% compared to the year-ago period, which was up from an 8.7% rise in September. Capacity climbed 8.4% and load factor rose 1.3 percentage points to 78.0%. Seasonally-adjusted passenger volumes are rising at an annualized rate of 8-9%, supported by the solid regional economic backdrop and strong growth in the number of connections.
  • European carriers’ October demand climbed 6.2% over October 2016, which was a slowdown compared to the 7.2% year-over-year growth recorded for September. Capacity increased 4.5% and load factor rose 1.3 percentage points to 84.9%, highest among regions. While economic conditions have shown strong improvement over the past year or so, the upward trend in seasonally-adjusted traffic has slowed considerably since May. This reflects the nature of international travel in the region, which is predominantly short-haul and hence, highly-price sensitive.
  • Middle East carriers experienced a 6.9% rise in demand in October, improved from 3.9% in September. Capacity increased 5.3%, and load factor climbed 1.0 percentage point to 69.6%. As in Europe, the upward trend in RPKs has slowed. Demand to and from North America fell in year-on-year terms for the seventh consecutive month in September (the most recent month for which route-specific figures are available) and it remains the only international market not to have grown in annual terms this year. Traffic has been heavily affected by the now-lifted ban on portable electronic devices, as well as from the proposed travel bans to the US.
  • North American airlines’ traffic climbed 3.7% in October compared to the year-ago period, lowest among the regions but an improvement compared to the hurricane-impacted 3% growth in September. Capacity rose 5.2% and load factor dropped 1.1 percentage points to 79.2%. North America was one of just two regions to post a load factor decline. There continue to be indications that inbound travel to the US is being deterred by the additional security measures now involved with travelling to that country.
  • Latin American airlines had an 8.7% increase in traffic in October, which was a slowdown from September growth of 10.7%, but still the second strongest percentage growth among regions. On a seasonally-adjusted basis, however, volumes are slightly below where they were three months ago. This may indicate spillover from the impact of Hurricanes Irma and Maria. Capacity climbed 9.1%, and load factor slipped 0.3 percentage points to 82.6%.
  • African airlines’ traffic grew 7.5% year-on-year in October, up from 3.6% in September. Conditions in the region’s two largest economies—Nigeria and South Africa, still are diverging, with business confidence levels in Nigeria near a three-year high, while confidence levels in South Africa are consistent with falling economic activity. Capacity rose 3.4%, and load factor jumped 2.7 percentage points to 70.9%.

Domestic Passenger Markets       

Domestic demand climbed 7.2% in October compared to October 2016, while capacity rose 6.6%. India and China continued to lead all markets, with double-digit growth rates.

October 2017
(% year-on-year)       

World share¹

RPK

ASK

PLF     
(%-pt)²     

PLF
(level)³  

Domestic

36.4%     

7.2%

6.6%    

0.4%      

83.4% 

Australia

1.0%

2.8%

1.4%

1.1%

79.8%

Brazil 

1.2%

7.7%

2.7%

3.9%

83.2%

China P.R             

8.7%

10.0%

11.0%       

-0.8%

84.3%             

India             

1.3%

20.4%

15.5%

3.4%

84.9%

Japan             

1.1%

2.3%

-0.8%             

2.3%

76.1%

Russian Fed.             

1.3%

6.1%         

2.3% 

2.9%           

80.2%

US

15.0%

5.3%      

5.4%

-0.1%

85.6%

¹% of industry RPKs in 2016   ²Year-on-year change in load factor   ³Load factor level  *Note: the seven domestic passenger markets for which broken-down data are available account for 30% of global total RPKs and approximately 82% of total domestic RPKs                        

  • Brazil’s domestic market climbed 7.7% year-on-year in October, which was a 27-month high as the economy slowly continues to recover from the deep recession of recent years.
  • Russia’s domestic traffic rose was 6.1% in October, which was the slowest pace in a year.

The Big Picture

"Demand for air travel remains strong as we head into the holiday travel season, and signs point to the broad-based economic upturn continuing into 2018, which is good news for demand for air travel. Tomorrow, IATA will hold our annual Global Media Day, bringing together some 100 journalists and bloggers from around the world, where we will present our updated economic forecast, among other topics. I look forward to this opportunity to discuss and debate the key issues and initiatives facing commercial aviation with our colleagues in the media," said de Juniac.  

View full October passenger traffic analysis

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