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July 2018 IATA Air Passenger Market Analysis
A solid start to the peak season, alongside a record July load factor

RPK growth makes a solid start to the peak season
Year-on-year growth in industry-wide revenue passenger kilometres (RPKs) slowed to 6.2% in July, down from 8.1% in June. Nonetheless, the July outcome marked a solid start to the peak passenger demand season and underlines our view that 2018 will be another year of above-trend growth for industry-wide RPKs. Passenger volumes have increased by 6.9% over the first seven months of the year compared to the same period of 2017 – in line with the average pace seen over the past five years. That said, and as we have noted before, the pace of growth this year to date has been slower than that seen in the same period of 2017, during which RPKs grew by 8.1% in year-on-year terms. This supports our view that RPK growth, while remaining robust, will slow moderately in calendar-year 2018 relative to last year.

Key demand drivers have become less supportive

This view reflects a number of factors, particularly the increase in airline input costs, which stems in large part from higher fuel prices. Upward pressure on input costs is translating into a reduced boost to demand from lower airfares, which has been a key driver of the strong RPK growth rates seen in recent years. As we pointed out in a recent note, declines in the value of a number of currencies relative to the US dollar will exacerbate the impact of rising US dollardenominated fuel costs for airlines in some key emerging market economies. Meanwhile, business surveys also indicate that the underlying economic backdrop has become more mixed too – particularly when compared to the best of the synchronized and broad-based pick-up in economic activity seen at end-2017.

African airlines demand trend remains strong
Volatility a year ago was also a key factor behind the slowdown in year-on-year international RPK growth for African airlines in July (to 6.8%, from 11.0% in June). Indeed, the upward SA demand trend remains strong. Higher oil and commodity prices have supported the economic backdrop in a number of countries, including Nigeria, although business confidence remains fragile in South Africa.

Highlights of the July 2018 Air Passenger Market Analysis

  • Annual growth in industry-wide revenue passenger kilometres made a solid start to the peak demand season in July (6.2%), underlining our view that 2018 will be another year of above-trend growth for passenger volumes.
  • The industry-wide load factor posted a record high for the month of July (85.2%), led by European airlines (89.0%).
  • Airlines based in Asia Pacific posted the fastest annual international RPK growth rate for the first time in three months. Meanwhile, the domestic India growth rate remained in double-digit territory for the 47th month in a row. Download the full document here. 

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