After a period of record profits and margins among many of the world’s biggest airlines, demand growth may be slowing, IATA chief Tony Tyler has warned.
“The stimulus from lower oil prices appears to be tapering off. And the global situation is subdued,” the outgoing director general said in a statement.
Evidence of the slowdown apparently appears in April data, which show year-on-year passenger growth of 4.6 per cent – the slowest since January 2015.
Incredibly, IATA attributes the decline to the Brussels terror attack, ignoring the fact that Easter fell in March this year but in April last year, thereby skewing the results downwards this April.
Despite this error, Tyler’s assertion of “longer-term clouds over the pace of demand growth” has merit, and while 2016 will be another profitable year, the peak of the aviation cycle may have passed.
A major theme in all recent airline results has been yield pressure, which is dampening further enjoyment of low fuel prices.
There are also signs that the capacity discipline of several years ago is slackening, with load factors down in April across all regions except Europe and Asia, where they made only slight gains.
Two standout countries have been Brazil and India, though for very different reasons. Economic woe in the former saw a 12 per cent reduction in demand for domestic traffic, while India’s resurgence was confirmed in April with 22 per cent higher traffic.
IATA also put India’s domestic load factor at 84.3 per cent, second only to the US, which is a big surprise for a market long assumed to be plagued by over-capacity.
India has now registered double-digit domestic growth for each of the past 20 months, fuelling hopes that even former basket case Air India may conjure up an annual operating profit.
For if not now, when?
