IATA Sees July Air Travel Demand Dampening

Photo Source: IATA

Brexit confusion, trade conflicts and tariffs appear to be taking a toll on demand for air travel, which slowed down in July, the International Air Transport Association (IATA) said this week.

July traffic for European airlines registered a modest 3.3 percent annual growth, down from a 5.6 percent year-over-year rise in June, marking the slowest rate of growth since mid-2016.

IATA attributes the waning performance to continuing Brexit uncertainty and slowing German exports & manufacturing activity – a result of weakening business and consumer confidence. Capacity rose 3.2 percent, and load factor climbed 0.1 percentage point to 89.0 percent, highest among the regions.

Overall, July international passenger demand rose 2.7 percent compared to July 2018, which was a deceleration compared to the 5.3 percent growth recorded in June. Capacity climbed 2.4 percent, and load factor edged upward 0.2 percentage point to 85.3 percent. All regions reported growth, led by airlines in Latin America.

“July’s performance marked a soft start to the peak passenger demand season. Tariffs, trade wars, and uncertainty over Brexit are contributing to a weaker demand environment than we saw in 2018. At the same time the trend of moderate capacity increases is helping to achieve record load factors,” said IATA Director General and CEO Alexandre de Juniac.

At the same time, global passenger demand growth dropped in July with total revenue passenger kilometers up (RPKs) by 3.6 percent  against the same month in 2018 but down from 5.1 percent annual growth recorded in June.

Source: IATA

All regions posted traffic increases. Monthly capacity  increased by 3.2 percent and load factor rose 0.3 percentage point to 85.7 percent, which is a new high for any month.

Meanwhile, demand for domestic travel outperformed international growth in July, as RPKs rose 5.2 percent, up from 4.7 percent growth in June. Domestic capacity climbed 4.7 percent, and load factor rose 0.4 percentage point to 86.5 percent.

Europe accounts for 26.8 percent of the total passenger traffic market in terms of RPK.

‘Flight Shaming’ and ‘Green’ Taxes

Meanwhile earlier this month, de Juniac referred to the impact of the Swedish-born “flight shaming” movement that is seeing all the more European travelers opting to use trains instead of planes for travel.

De Juniac said the environmental challenge, which he described as “the biggest threat to the airline industry in Europe”, will probably move to other parts of the world, including the US and Asia.

“If you believe or think that the environmental concern is a world concern touching everyone on the planet (…) there’s no reason to believe that other young people won’t react,” de Juniac said.

France is among the first countries to impose a “green” tax in July on airlines flying from its airports to go towards supporting the environment.

“The carbon footprint of the average air journey this year is half what it would have been in 1990. From 2020 overall, net emissions will be capped… Unfortunately, with a host of environmental taxes planned or under consideration in Europe, it seems that governments are more interested in taxing aviation than partnering with industry to make it sustainable,” said de Juniac.

IATA represents some 290 airlines comprising 82 percent of global air traffic.