Air Travel Demand Remains Strong, Despite Minor Disruptions


air_trafficDespite some softening in global economic growth, particularly in emerging markets, the global passenger traffic results for June-to-August showed a continuation of the strong growth in air travel demand. The only slowdown (a rise of 5.3%) has been recorded in June, in part due to the timing of Ramadan, which affected the demand in the Middle East. However, the industry expanded in July and August resuming the growth trend seen earlier in the year, resulting in the overall 7.1% year-on-year growth during the period.

International travel in the Asia Pacific rose 7.7% during the period. This is a slowdown as compared to 9.4% growth, recorded in May. Emerging regions of Asia have experienced notable declines in trade activity in 2015. Meanwhile, according to Markit, China’s manufacturing sector has been struggling during the recent months, accompanied by weakness in export orders, which can also negatively affect demand for business-related international air travel.

European carriers recorded a 5.5% rise in international RPKs. As indicators of business activity suggest that the region’s economic recovery is on track, this is supporting demand for international travel on carriers in these regions.

International air travel on North American carriers was up 4.2%, with the results for July and August being by far the strongest in 2015. Expectations for better economic performance in H2 compared to H1 should further support demand for air travel, but it is likely that the strengthening dollar will continue to place downward pressure on international leisure travel to the US.

traffic_growthMeanwhile, international air travel in the Middle East rose 14.7%, despite moderate growth in June. According to Markit, major economies in the Middle East, including Saudi Arabia and the United Arab Emirates, have seen slowdowns in non-oil sectors in Q2 2015, but the rates of growth remain robust and this should help sustain solid growth in air passenger demand for local carriers.

Growth for Latin American carriers was a robust 7.0% year-on-year. Regional trade volumes have shown strong improvement during H1 2015, and despite weakness in Brazil and Argentina, the increase in trade activity has provided a boost to business-related international travel.

International RPK growth for African carriers was the weakest among all regions, with volumes up 2.2%. However, the results improved in July and August, with a solid rise of 4.9% and 3.6% respectively. The upward trend, however, have been very weak, with volumes year-to-date contracting 0.5%. The most recent result, although an improvement, could well be owing to volatility in the volumes, as fundamental drivers suggest the downward trend could continue.

All in all, although the global economic outlook is decidedly mixed, demand for aviation connectivity remains strong. Growth in air travel, particularly the more price sensitive economy class leisure travel, has received some support from lower fares. As the fall in oil prices compared to mid-2014 expected to sustain growth and demand for passenger travel in 2015, further expectations are broadly positive.

Source AviaAM Leasing