Global Air Travel Demand Up In April, North America Sluggish

The monthly data released by the International Air Transport Association (IATA) revealed a 5.9% year-over-year increase in demand for air travel across the globe for the month of April 2015. The rise was attributable to an increase in both international and domestic traffic (measured in revenue passenger kilometers) in the month. The report also revealed a 6.1% rise in capacity (measured in available seat kilometers). The greater increase in capacity compared with air traffic resulted in the load factor (percentage of seats filled with passengers) declining 10 basis points (bps) to 79.4% in April.

International Traffic

The 5.2% increase in International demand was driven by strong performance of carriers from the Asia-Pacific, Latin America and Middle East.

International traffic in the Asia-Pacific region registered a handsome 9% growth on a 6% rise in capacity. The greater increase in traffic compared with capacity led to a 220 bps rise in load factor to 78.3%. Carriers in the Middle East which include the likes of Emirates, Etihad and Qatar Airways reported an 8.2% increase in April traffic on the strength of the economy to withstand the weak oil revenues. However, the greater increase in capacity (13.3%) resulted in the load factor declining 360 bps to 77.2% for carriers in the region.

International traffic for Latin American carriers which include the likes of Gol Linhas Aereas Inteligentes (NYSE:GOL) and Copa Holdings SA (NYSE:CPA) for the month was up 6.3% on a 7.3% rise in capacity. International April traffic for European carriers which include the likes of Ryanair Hldgs (NASDAQ:RYAAY) climbed 3.7% on a 4.7% rise in capacity. Economic stimulus boosted demand for carriers in the region. African carriers disappointed in the month with both traffic and capacity declining due to weakness in the economy.

Strong Dollar Hurts North American Carriers

The IATA monthly report however did not reveal healthy traffic data for the carriers in North America. International traffic for carriers like United Continental Holdings Inc (NYSE:UAL), Delta Air Lines Inc (NYSE:DAL), Southwest Airlines Company (NYSE:LUV), JetBlue Airways Corporation (NASDAQ:JBLU) and Alaska Air Group Inc (NYSE:ALK) inched up 0.7% with the strength of the U.S. dollar hampering international leisure travel into the U.S. Capacity improved 4.1% and load factor fell 260 basis points to 78.1% due to greater increase in capacity.

Mixed Picture for Summer Travel

The IATA said that although weak fuel prices have emerged as a boon for aviation companies given the inverse relation between fuel costs and the value of airline stocks, the outlook for carriers is a mixed one as far as the impending busy summer season in the northern hemisphere is concerned. According to the forecast, the strength of the U.S. dollar is likely to a dampener.

India, China Boost Domestic Traffic

According to the report, domestic travel demand ran the show in April. Stellar domestic traffic growth in India (20.7%) and China (15.5%) boosted domestic passenger traffic by 7.2%. However, domestic demand (up only 1.7%) in Russia was weak during the month with the economy in recession. The domestic traffic picture in the U.S. was better than the broader international space, with the metric reporting a 4.3% growth.

Total domestic capacity for the month climbed 6.4% and load factor climbed 60 bps to 80.8% driven by the greater increase in traffic. Russia revealed the greatest imbalance between traffic and capacity with the latter rising 13.2% and leading to empty planes.

Air Freight Demand Weak

IATA said that the 3.3% increase in global cargo volumes was much less than 4.3% growth witnessed in the first three months of the year. Air cargo volume is a key indicator of business confidence. Weak world trade growth was blamed for the weakness in demand growth for air freight.

Slowdown in the Asia Pacific region was the main culprit. Carriers in the Middle East registered a healthy 14.1% growth in air freight demand. The increase was attributable to the expansion of network and capacity that has encouraged air freight to go through hubs in the Middle East.

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