Passenger traffic stays strong in Q2; full recovery in 2024

Passenger traffic sustained strong demand for air travel industry-wide in the second quarter (Q2) of 2023, said a report by International Air Transport Association (IATA).

The near-term outlook for the global industry remains largely unchanged, with total passenger numbers expected to return to 2019 levels in early 2024 and double by 2040. Macroeconomic headwinds still skew the range of uncertainty around our short-term forecast to the downside, IATA said.

Passenger traffic, measured in revenue passenger-kilometres (RPKs), increased 40.5% YoY in Q2, slightly outpacing seat capacity. As airlines continued to increase their operations, seat supply, measured in available seat-kilometres (ASKs), also grew 34.8% YoY.

In the second quarter of 2023, industry-wide RPKs and ASKs were 12.4% and 13.1% below Q2 2019 levels, respectively. This reflects significant progress towards full recovery from Q2 2022, where RPKs and ASKs were 37.6% and 35.5% below pre-pandemic levels, respectively.

The passenger load-factor (PLF) rose across all regions and reached near pre-pandemic levels in Q2 2023, except for Africa and North America where load factors had already recovered last year. At the industry level, the PLF was 82.4% in the second quarter, 0.7 percentage points (ppts) below the Q2 2019 level.

The industry-wide improvement in load factors is a positive indicator of demand for air travel as well as of more profitable operations for airlines.

Globally, domestic passenger traffic achieved full recovery this quarter, standing 4.5% above Q2 2019 levels. This development was driven by the resilience of the main domestic markets and the strong rebound in PR China, where passenger flows continued to increase since the start of this year and now exceed pre-pandemic levels. Domestic RPKs in China were 9.7% higher this quarter compared to Q2 2022.

All monitored markets achieved full recovery in Q2 2023, except for Australia and Japan where traffic levels were 0.9% and 0.3% short of Q2 2019 levels, respectively.

Overcoming the setback caused by long-lasting travel restrictions, the recovery in international traffic maintained its course in Q2 2023. Total international RPKs reached 87.6% of Q2 2019, a 7.9 ppt improvement from the recovery in the previous quarter.

Asia Pacific airlines led in growth of international RPKs among the regions, with a 156.2% YoY increase, followed by Africa with 44.0%.

Overall, the industry restored 87.6% of pre-covid international RPKs as all regions approached full recovery. North America surpassed pre-pandemic levels by 1.6%, and Middle Eastern carriers were just 0.6% short of full recovery.

Meanwhile, RPKs performed by Asia Pacific carriers were still 33.5% below their 2019 levels. The main route areas we track continue to reflect these developments. In the second quarter, passenger flows between Europe and North America as well as Europe and the Middle East exceeded their pre-pandemic levels by 5.9% and 2.1%, respectively.

International traffic within Europe was restored completely, with RPKs equalling those of Q2 2019. Passenger flows from Asia Pacific continue to grow rapidly and are closing the gap on remaining route areas.

Between the Middle East and Asia, RPKs were only 7.1% shy of 2019 levels, contrasting greatly with competing routes such as Europe – Asia, which saw 33.5% less traffic compared to Q2 2019, reflecting the traffic diversions caused by the war in Ukraine.

The breakdown of international traffic by cabin class shows that in Q2 2023, Premium traffic recovered ahead of Economy at the industry level. Total Premium RPKs were 8.1% below 2019 levels while Economy lagged further at 12.7% short on that basis.

Most regions experienced a comparable development with the exception of Middle East and Latin America carriers. While it is still unclear if business travel will return to pre-pandemic patterns, the strong rebound of Premium traffic is a welcome development for the industry as it is a significant source of revenue for network carriers, despite representing only 8% of total international traffic.

After having outpaced international ticket sales during the recovery, domestic sales followed a stable upward trend, exceeding pre-pandemic levels in Q2 2023. Demand for international travel has also shown similar positive signs over the past few months. Total forward bookings continue to indicate that demand remains resilient despite the current economic challenges faced by households, and the elevated fares due to high jet fuel prices and a generally high rate of inflation.

Consequently, Q2 2023 saw more growth in Origin – Destination (O-D) passenger traffic, reaching 96.6% of Q2 2019 levels, a 21.7 ppt increase in recovery levels compared to Q2 2022. Stable trends in total forward bookings suggest that O-D passenger numbers will see continued growth over the months to come, supporting our current forecast.

While global consumer price inflation likely peaked in late 2022, the higher price level continues to affect household disposable income, an impact that has so far been mitigated by historically tight labor markets.

If the global economy slows over the coming quarters, unemployment rates might rise again and put downward pressure on the demand for air travel. On the supply side, airlines continue to face higher costs globally as well as capacity constraints throughout the whole air transport value chain.

On the other hand, high passenger demand in all regions has propelled traffic towards full recovery. The past upward revisions we have made to our regional and global forecasts are therefore maintained, with most regions expected to return to year-on-year pre-pandemic levels in 2023 and Asia Pacific anticipated to recover in 2024 as international connections to the region are catching up with the rest of the world.

We expect the total industry to reach the full-year 2019 level in 2024. This will nevertheless leave the industry below our pre-pandemic forecast. - TradeArabia News Service





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