Worldwide air passenger traffic demand grew 7.7% year-over-year in May, slowing from a six-year high 10.9% growth in April, according to IATA’s May Air Passenger Market Analysis. IATA emphasized that, despite the slowdown, demand remains strong and is “well ahead of both the five- and 10-year average rates (6.4% and 5.5%, respectively).”

Business confidence, as measured in the services purchasing managers’ index (PMI), has flattened since January after having risen for five consecutive months beginning September 2016, IATA said. Additionally, lower air fares, which have stimulated air passenger demand worldwide, are starting to ease, IATA said, as airlines’ costs are on the rise.

“The degree of stimulus from lower fares is [now] around half that seen in 2H 2016, and is likely to fade further during the second half of the year,” IATA senior economist David Oxley said.

Global air passenger market capacity increased 6.1% year-over-year (YOY) in May, continuing a three-month trend of capacity growth slightly below corresponding demand growth. As a result, global passenger load factors have been at near record highs, IATA said, and May’s 80.1% load factor is the highest-ever for the month.

“Passenger demand is solid, and we don’t see foresee any weakening over the busy summer months in the northern hemisphere,” IATA DG and CEO Alexandre de Juniac said. “But the rising price of fuel and other input costs is likely to see airlines’ ability to stimulate markets with lower fares taper over the coming months.”

International traffic globally was up 7.6% YOY in May, with capacity growing 5.7%, for a passenger load factor of 78.5%, up 1.4 points YOY. Africa had the largest increase in international traffic, up 11.7%, reflecting a recovery in the passenger market to and from Europe. International traffic in the Asia-Pacific region grew 10.5% YOY, reflecting a rebound from the terrorism-related decline of early 2016; traffic is robust on both Asia-Europe routes and international routes within Asia, IATA said. 

International traffic growth for Middle Eastern airlines, however, is close to an eight-year low, rising 3.7% YOY in May, reflecting a downturn on the Middle East to North America market (demand fell 1.2% in April). “Disrupting factors include the recent ban on personal electronic devices as well as the wider impact on inbound travel to the US from President Trump’s proposed travel bans,” Oxley said, “[combined] with a moderation in the pace of growth of non-stop services flown by the ‘big-three’ Middle Eastern airlines.”

Worldwide domestic traffic increased 7.9% YOY in May as capacity on domestic routes grew 6.9%, producing an 83% load factor. India again showed the largest increase, up 17.7% YOY, but has noticeably slowed over the past six months, to an annualized rate of 7%, since the November 2016 demonetization of India’s ₹500 and ₹1,000 banknotes. China’s domestic traffic also grew strongly in May, up 16.8% YOY. “Ongoing growth in the number of unique airport-pair routes served is also translating into time savings for passengers and is continuing to stimulate demand,” Oxley said.

Mark Nensel