Monday, January 2, 2017

Cheap Oil Drives Airline Growth, Despite Dip Falling GDP

Despite declining growth rates for gross domestic product (GDP) around the world in 2017, the International Civil Aviation Organization expects low air fares, driven by suppressed oil prices, to continue to spur increased demand for air transport this year. The organization now expects global real GDP growth for 2017 to be around 2.4 percent—down from its earlier 2.9 percent projection.

In preliminary figures for 2016 released on Monday, ICAO reported that the total number of passengers carried on scheduled services last year reached 3.7 billion, which was 6 percent up on 2015. The number of departures in 2016 climbed to 35 million globally and revenue passenger kilometers saw an increase of 6.3 percent (to 7.015 trillion RPKs). RPK growth was down from the 7.1 percent increase achieved in 2015.

All regions of the world, apart from Africa and the Middle East, posted slower RPK growth in 2016. Europe accounted for the largest share of international RPKs with 36 percent—an increase of 4.3 percent compared with 4.3 percent. The Asia Pacific region had the second largest share with 29 percent and achieved 8 percent growth.

The Middle East region had a 15 percent share of international RPKs, with 11.2 percent growth. North America, with a 13 percent share, had the lowest rate of growth of 3.5 percent. Latin America and the Caribbean, with 4 percent of RPKs, achieved 6.5 percent growth, while Africa, with 3 percent, boosted its growth rate to 5.7 percent (more than double the 2.3 percent rate it recorded in 2015).

Domestic scheduled services worldwide growth by 6.2 percent in 2016, which was down from 7.3 percent in 2015. North America is still the world’s largest domestic air transport market with 43 percent of all domestic RPKs.

The highest growth rate worldwide, at 10 percent, came from the Asia Pacific region, driven by burgeoning demand for flights within India and China. Collectively, this region now accounts for 40 percent of global domestic traffic.

For the first time, more than 1 billion passengers worldwide flew on low-cost carriers (LCC) last year, with this sector of the airline industry accounting for 28 percent of all scheduled passengers. Europe had the highest segment of LCC passengers with 32 percent, followed by Asia Pacific and North America with, respectively, 31 percent and 25 percent.

Total air transport capacity, expressed in terms of available seat-kilometers (ASKs) increased globally by 6.4 percent. As a result of this combined with slowing growth, overall load factors declined slightly from 80.4 percent in 2015 to 80.3 percent in 2016.

According to ICAO, load factor rates are under growing pressure in the Middle East, where they are down to an average of 74.7 percent in 2016, compared with 76.3 percent in 2015.

Worldwide scheduled freight traffic, expressed in freight tonne-kilometers (FTKs), grew by 2.6 percent in 2016, which was a slight improvement from the 1.7 percent growth achieved in 2015. However, air cargo load factors declined from 47 percent in 2015 to 46 percent in the year just ended.

For 2016, airline profitability was mainly bolstered by lower fuel costs, which accounted for nearly a fifth of industry-wide operating expenses—compared with around a third in 2015. The global airline industry is expected to end 2016 with record operating profits of around $60 billion and an operating margin of 8 percent. This compares with $58 billion and 8 percent in 2015.

ICAO’s final statistics for 2016 are due to be published in July 2017.

(Charles Alcock - AINOnline News)

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