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June 2017 IATA Air Passenger Market Analysis
Annual passenger growth posts a 12-year high in first half of 2017

A strong first half of 2017 for passenger demand…
Industry-wide revenue passenger kilometres (RPKs) grew by 7.8% year-on-year in June, and by a similar rate (7.9%) in the first half of the year (H1 2017) as a whole. Nearly three-quarters of the year-on-year increase in global RPKs in H1 2017 was accounted for by airlines based in Asia Pacific and Europe.

…in part reflecting a stronger economic backdrop

The strong start to the year for passenger demand has been set against a markedly brighter economic backdrop relative to the first half of 2016, as well as a period of demand stimulation from lower airfares.

The robust finish to 2016 for seasonally-adjusted (SA) traffic has also provided a favorable starting point for RPK growth rates in 2017. In fact, even if SA traffic had not risen at all in H1 2017 (ie, had it remained steady at its December 2016 level), year-on-year RPK growth in the first half of the year as a whole would still have been in the region of 6%.

Further signs of an easing in the SA trend…

That said, the latest data provide further evidence that the upward trend in SA passenger traffic has slowed from that seen in the final months of 2016. Industry-wide RPKs were growing at an annualized rate of more than 12% coming into 2017, but this has slowed to around 7% since February.

It is worth putting this slowing trend in perspective; despite the slowing, the annualized pace of growth remains ahead of the average growth rate of both the past five and ten years (6.4% and 5.5%, respectively).

However, as we have noted before, the slowing SA trend is consistent with a softening in the exceptionally supportive conditions for passenger demand that were in place in H2 2016. This relates to two key factors, the first of which is developments in business confidence; having risen for five consecutive months between September 2016 and January 2017, the global services purchasing managers’ index – which is strongly correlated with industry-wide passenger growth – has now tracked sideways over the first six months of 2017. The second factor relates to less stimulus to demand from lower airfares; now that airline yields look to have bottomed out, the degree of demand stimulation is currently around half that seen in H2 2016, and is likely to fade further during H2 2017.

Highlights of the June 2017 Air Passenger Market Analysis

  • Global revenue passenger kilometres grew by 7.9% year-on-year in H1 2017 – the fastest first half since 2005.
  • The strong start to the year has been driven by a brighter global economic backdrop and stimulus from lower airfares. However, the exceptionally supportive demand conditions have softened somewhat.
  • The industry-wide passenger load factor posted an all-time high for the first six months of a year (80.7%).
  • The Middle East was the only region to see a deceleration in annual int’l RPK growth in H1 2017 vs a year ago.  Download the full document here. 

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