Airline association Iata has reported confidence in the aviation industry at a ten-year high.
Iata’s latest survey of airline chief financial officers (CFOs) in January found 86% of respondents expect passenger volumes to rise this year, the highest proportion “in more than a decade”.
However, the association warned of higher fares, suggesting “rising input costs suggest we are unlikely to see the same degree of demand stimulation” as last year.
The association reported a 7.6% rise in global passenger numbers in 2017, “well above the 10-year average annual growth rate of 5.5%”, noting: “2017 got off to a very strong start and largely stayed that way throughout the year.”
European carriers saw an 8.2% increase in international traffic year on year, with capacity rising 6.1%, producing an average load factor of 84.4% – the highest of any region.
North American airlines enjoyed their fastest growth in demand since 2011, with traffic rising 4.8% and capacity up 4.5%.
Carriers in the Asia-Pacific recorded overall passenger growth of 9.4% against capacity growth of 7.9%.
Only the Middle East saw a slowdown in growth on 2016 with the region’s share of global passenger traffic falling for the first time in 20 years to 9.5%, although passenger traffic still rose 6.6% year on year.
The Middle East market to North America was the most severely hit, reflecting the temporary ban on laptops in cabin baggage and the US imposition of travel bans on people from several Muslim-majority countries.
However, looking forward Iata reported: “While the underlying economic outlook remains supportive in 2018, rising input costs, most notably fuel, suggest we are unlikely to see the same degree of demand stimulation from lower fares that occurred in the first part of 2017.”
It noted: “The upward trend in oil prices is expected to continue to impact airline costs in the year ahead.”
Iata’s January confidence survey found 75% of CFOs and airline heads of cargo reported an improvement in profitability year on year in the last quarter of 2017, “more than double the proportion in Q1 2017, when the squeeze on industry profit margins looks to have peaked”.
More than half (55%) reported higher passenger yields in the final quarter of 2017, down 10 percentage points on the previous survey “but still the second highest proportion since 2012”.
Iata noted: “This suggests passenger yields are finally starting to trend upwards, although we are still waiting to see clear evidence of this in ticketing data.
“Looking ahead, 80% of respondents expect yields to remain steady or to increase over the year ahead.
“The survey results are consistent with other signs that demand is carrying momentum into 2018.”
However, the proportion expecting profits to fall over the next 12 months rose quarter on quarter.