IATA: Traffic Forecast Downgrade After Dismal Summer; Insufficient Capacity Dampens Air Cargo in August

- Geneva, Switzerland.

The International Air Transport Association (IATA) downgraded its traffic forecast for 2020 to reflect a weaker-than-expected recovery, as evidenced by a dismal end to the summer travel season in the Northern Hemisphere. IATA now expects full-year 2020 traffic to be down 66% compared to 2019. The previous estimate was for a 63% decline.
 
August passenger demand continued to be hugely depressed against normal levels, with revenue passenger kilometers (RPKs) down 75.3% compared to August 2019. This was only slightly improved compared to the 79.5% annual contraction in July. Domestic markets continued to outperform international markets in terms of recovery, although most remained substantially down on a year ago. August capacity (available seat kilometers or ASKs) was down 63.8% compared to a year ago, and load factor plunged 27.2 points to an all-time low for August of 58.5%.

Based on flight data, the recovery in air passenger services was brought to a halt in mid-August by a return of government restrictions in the face of new COVID-19 outbreaks in a number of key markets. Forward bookings for air travel in the fourth quarter show that the recovery since the April low point will continue to falter. Whereas the decline in year-on-year growth of global RPKs was expected to have moderated to -55% by December, a much slower improvement is now expected with the month of December forecast to be down 68% on a year ago. 

“August’s disastrous traffic performance puts a cap on the industry’s worst-ever summer season. International demand recovery is virtually non-existent and domestic markets in Australia and Japan actually regressed in the face of new outbreaks and travel restrictions. A few months ago, we thought that a full-year fall in demand of -63% compared to 2019 was as bad as it could get. With the dismal peak summer travel period behind us, we have revised our expectations downward to -66%,” said Alexandre de Juniac, IATA’s Director General and CEO. 

August 2020 (% year-on-year)

World share1

RPK

ASK

PLF (%-pt)2

PLF (level)3

Total Market 

100.0%

-75.3%

-63.8%

-27.7%

58.5%

Africa

2.1%

-87.4%

-75.5%

-36.6%

39.0%

Asia Pacific

34.6%

-69.2%

-60.3%

-19.0%

65.0%

Europe

26.8%

-73.0%

-62.1%

-25.5%

63.5%

Latin America

5.1%

-82.8%

-77.5%

-19.3%

63.9%

Middle East

9.1%

-91.3%

-80.8%

-44.9%

37.2%

North America

22.3%

-77.8%

-59.4%

-39.5%

47.7%

1% of industry RPKs in 2019  2Year-on-year change in load factor 3Load Factor Level

International Passenger Markets

August international passenger demand plummeted 88.3% compared to August 2019, mildly improved over the 91.8% decline recorded in July. Capacity sagged 79.5%, and load factor fell 37.0 percentage points to 48.7%.
 

  • Asia-Pacific airlines’ August traffic sank 95.9% compared to the year-ago period, barely budged from a 96.2% drop in July, and the steepest contraction among regions. Capacity dived 90.4% and load factor shrank 48.0 percentage points to 34.8%.
     
  • European carriers’ August demand plunged 79.9% compared to last year, improved from an 87.0% drop in July, as travel restrictions were lifted in the Schengen Area. However, more recent flight data suggests this trend has reversed amid a return to lockdown and quarantine in some markets. Capacity fell 68.7% and load factor dropped by 32.1 percentage points to 57.1%, which was the highest among regions.
     
  • Middle Eastern airlines had a 92.3% fall in demand for August, compared with a 93.3% decline in July. Capacity collapsed 81.9%, and load factor sank 47.1 percentage points to 35.3%. 
     
  • North American carriers’ traffic tumbled 92.4% in August, little changed compared to 94.4% decline in July. Capacity fell 82.6%, and load factor plunged 49.9 percentage points to 38.5%.
     
  • Latin American airlines had a 93.4% demand drop in August compared to the same month last year, versus a 94.9% drop in July. Capacity crumbled 90.1% and load factor dropped 27.8 percentage points to 56.1%, second highest among the regions. 
     
  • African airlines’ traffic sank 90.1% in August, slightly improved over a 94.6% decline in July. Capacity contracted 78.4%, and load factor fell 41.0 percentage points to 34.6%, which was the lowest among regions.

 

Domestic Passenger Markets

Domestic traffic fell 50.9% in August. This was a mild improvement compared to a 56.9% decline in July. Domestic capacity fell 34.5% and load factor dropped 21.5 percentage points to 64.2%. 

August 2020 (% year-on-year)

World share1

RPK

ASK

PLF (%-pt)2

PLF (level)3

Domestic

36.2%

-50.9%

-34.5%

-21.5%

64.2%

Australia

0.8%

-91.5%

-81.2%

-44.9%

37.1%

Brazil

1.1%

-67.0%

-64.3%

-6.4%

76.1%

China P.R.

5.1%

-19.1%

-5.9%

-12.3%

75.3%

India

1.3%

-73.6%

-66.0%

-19.1%

66.2%

Japan

6.1%

-68.6%

-28.4%

-45.6%

35.6%

Russian Fed.

1.5%

3.8%

9.3%

-4.6%

86.4%

US

14.0%

-69.3%

-45.7%

-37.7%

48.9%

 

1% of industry RPKs in 2019  2Year-on-year change in load factor 3Load Factor Level

 

  • US carriers’ August traffic was down 69.3% compared to August 2019, only a slight improvement compared to July, when traffic fell 71.5%. An increase in outbreaks and quarantines in key domestic markets contributed to the disappointing result.
     
  • Russian airlines saw their domestic traffic rise 3.8% compared to August 2019, the first market to see an annual increase since the onset of the pandemic. Falling fares along with a boom in domestic tourism were among the main contributors to the positive swing. 

The Bottom Line: 

“Traditionally, cash generated during the busy summer season in the Northern Hemisphere provides airlines with a cushion during the lean autumn and winter seasons. This year, airlines have no such protection. Absent additional government relief measures and a reopening of borders, hundreds of thousands of airline jobs will disappear. But it is not just airlines and airline jobs at risk. Globally tens of millions of jobs depend on aviation. If borders don’t reopen the livelihoods of these people will be at grave risk. We need an internationally agreed regime of pre-departure COVID-19 testing to give governments the confidence to reopen borders, and passengers the confidence to travel by air again,” said de Juniac.

Read Alexandre de Juniac's remarks
View the COVID-19 Downgrade for global air travel outlook presentation (pdf)
View the full August Air Passenger Market Analysis (pdf)

CARGO

The International Air Transport Association (IATA) released data for global air freight markets in August showing that improvement remains slow amid insufficient capacity. Demand moved slightly in a positive direction month-on-month; however, levels remain depressed compared to 2019. Improvement continues at a slower pace than some of the traditional leading indicators would suggest. This is due to the capacity constraint from the loss of available belly cargo space as passenger aircraft remain parked.  
 

  • Global demand, measured in cargo tonne-kilometers (CTKs*), was 12.6% below previous-year levels in August (-14% for international operations). That is a modest improvement from the 14.4% year-on-year drop recorded in July. Seasonally-adjusted demand grew by 1.1% month-on-month in August. 
     
  • Global capacity, measured in available cargo tonne-kilometers (ACTKs), shrank by 29.4% in August ( 31.6% for international operations) compared to the previous year. This is basically unchanged from the 31.8% year-on-year drop in July. 
     
  • Belly capacity for international air cargo was 67% below the levels of August 2019 owing to the withdrawal of passenger services amid the COVID-19 pandemic. This was partially offset by a 28.1% increase in dedicated freighter capacity. Daily widebody freighter utilization is close to 11 hours per day, the highest levels since these figures have been tracked in 2012. 
     
  • Economic activity continued to recover in August reflected, among other things, in the performance of the Purchasing Managers’ Index (PMI) indicator of economic health in the manufacturing sector:
    • The new export orders component of the manufacturing PMI rose by 5.1% year-on-year, its best performance since late 2017.
       
    • The PMI tracking global manufacturing output increased month-on-month and remained above the 50-mark, indicating growth. 

“Air cargo demand improved by 1.8 percentage points in August compared to July. That’s still down 12.6% on previous year levels and well below the 5.1% improvement in the manufacturing PMI. Improvement is being stalled by capacity constraints as large parts of the passenger fleet, which normally carries 50% of all cargo, remain grounded. The peak season for air cargo will start in the coming weeks, but with severe capacity constraints shippers may look to alternatives such as ocean and rail to keep the global economy moving,” said Alexandre de Juniac, IATA's Director General and CEO

August 2020 (% year-on-year)

World share1

CTK

ACTK

CLF (%-pt)2

CLF (level)3

Total Market

100%

-12.6%

-29.4%

10.6%

54.8%

Africa

1.8%

-0.2%

-37.9%

19.0%

50.2%

Asia Pacific

34.5%

-20.1%

-33.5%

10.3%

61.6%

Europe

23.6%

-18.9%

-32.1%

9.3%

56.8%

Latin America

2.8%

-27.3%

-43.5%

10.6%

47.8%

Middle East

13.0%

-6.9%

-24.3%

10.0%

53.5%

North America

24.3%

1.7%

-23.3%

12.0%

48.9%

1 % of industry CTKs in 2019  2 Year-on-year change in load factor  3 Load factor level

August Regional Performance

  • Asia-Pacific airlines saw demand for international air cargo fall 18.3% in August 2020 compared to the same period a year earlier. After a robust initial recovery in May, month-on-month growth in seasonally-adjusted demand declined for the second consecutive month. International capacity is particularly constrained in the region, down 35%. 
  • North American carriers reported that demand fell 4% compared to the previous year—the third consecutive month with a single-digit decline. This steady performance is due in part to strong domestic and transpacific demand on the Asia-North America route, reflecting e-commerce demand for products manufactured in Asia. International capacity decreased 28.2%.
  • European carriers reported a decrease in demand of 19.3% compared to the previous year. Improvements have been slight but consistent since April’s performance of -33%. Demand on most key trade lanes to / from the region remained weak. The large Europe–Asia market was down 18.6% year-on-year in August. International capacity decreased 33.5%. 
  • Middle Eastern carriers reported a decline of 6.8% in year-on-year international cargo volumes in August, a significant improvement from the 15.1% fall in July. Regional airlines have aggressively added capacity in the last few months with international capacity improving from a 42% fall at the trough in April, to a decline of 24.2% in August, the most resilient of all regions. Demand on trade routes to and from Asia and North America remained strong with demand down 3.3% and up 2.3% respectively year-on-year.
  • Latin American carriers reported demand steady at -26.1% compared to the previous year, ending three consecutive months of deteriorating demand. Demand on trade routes between Latin America (particularly Central America) and North America have compensated for weakness on other routes. Capacity remains significantly constrained in the region with international capacity decreasing 38.5% in August, the largest fall of any region. 
  • African airlines saw demand increase by 1% in August. This was the fourth consecutive month in which the region posted the strongest increase in international demand and only instance of year-on-year growth among all regions in international volumes. Investment flows along the Africa-Asia route continue to drive the regional outcomes.

“Air cargo demand improved by 1.8 percentage points in August compared to July. That’s still down 12.6% on previous year levels and well below the 5.1% improvement in the manufacturing PMI. Improvement is being stalled by capacity constraints as large parts of the passenger fleet, which normally carries 50% of all cargo, remain grounded. The peak season for air cargo will start in the coming weeks, but with severe capacity constraints shippers may look to alternatives such as ocean and rail to keep the global economy moving,” said Alexandre de Juniac, IATA's Director General and CEO.

 

August 2020 (% year-on-year)

World share1

CTK

ACTK

CLF (%-pt)2

CLF (level)3

Total Market

100%

-12.6%

-29.4%

10.6%

54.8%

Africa

1.8%

-0.2%

-37.9%

19.0%

50.2%

Asia Pacific

34.5%

-20.1%

-33.5%

10.3%

61.6%

Europe

23.6%

-18.9%

-32.1%

9.3%

56.8%

Latin America

2.8%

-27.3%

-43.5%

10.6%

47.8%

Middle East

13.0%

-6.9%

-24.3%

10.0%

53.5%

North America

24.3%

1.7%

-23.3%

12.0%

48.9%

1 % of industry CTKs in 2019  2 Year-on-year change in load factor  3 Load factor level

View August Air Cargo Market Analysis(pdf)

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www.iata.org
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