Archive For The “IATA” Category
IATA has published its latest 20 year aviation forecast, and projects that China will overtake the US in terms of passenger traffic by 2022. The following graphic shows the top 10 markets in 2016 and 2036. It is clear that traffic growth in Asia will change the landscape of major markets, with China, India, Indonesia and Japan taking 4 of the top 6, and Thailand joining the top 10 by 2036.
Total traffic is expected to nearly double to 7.8 billion passengers in 2036, with the Asia-Pacific region driving more than half of the new passengers.
The Bottom Line
IATA confirms the forecasts from Airbus and Boeing that all show massive growth in Asia over the next two decades. Infrastructure, from airports to air traffic control to trained pilots and mechanics, will challenge the industry over the next two decades. Understanding the magnitude of travel demand well in advance enables the industry to act in advance to provide the capacity requirements to meet that demand. We are all a part of a growth industry, with unique challenges and opportunities over the next two decades that will be interesting to watch.
IATA released data showing that this year airlines across the world connected a record number of cities, with unique city-pair connections exceeding 20,000 for the first time. The annual percentage increase in the number of city pairs served was the largest since 2004 and represents a doubling of services since 1996 when there were fewer than 10,000 city pairs in operation.
The implication of this move should be clear to our readers – the change has been enabled by newer, longer range, aircraft.
Nearly three-quarters of the change between 2016 and 2017 came from within Asia and Europe. Note that more city-pairs were added in the domestic China market in 2017 than within the whole of Europe combined. As IATA notes: “China accounted for 11.4% of all city-pairs globally this year, up from 5.5% a decade ago.”
China is especially interesting because there is a general assumption that high high-speed lows air travel growth. Yet even with a highly developed high-speed rail network in Europe, it too has seen strong air route changes and growth.
The implications are that as markets start to come on stream in China, more aircraft will likely be needed. In September, Boeing released its forecast that states China will need 7,200 new aircraft over the next 20 years. Not just China, by the wider Asian region also needs longer-range aircraft to connect communities. Clearly, the same logic applies in all travel growth markets, Africa being another example.
While one naturally thinks about single-aisle aircraft as being the bulk of the growing demand, bear in mind that as economies develop, urbanization accelerates. It is the big urban areas that generate the greatest economic wealth and these areas also want more travel options. Which brings us to another IATA chart.
Take a look at this presentation from IATA’s media day. Airport growth is not keeping up with urbanization. Slot constraints are going to get worse, especially in the big cities. IATA then takes us through a series of options like slot pricing and auctions.
Of course, the way the problem is most likely to be solved is by deploying VLAs in these markets. The airline offering the highest price for an auctioned slot would best recoup that investment by selling the most seats for that slot. Ergo, the case for the VLA remains as strong as ever.
IATA reports that airline traffic is growing again. Take a look at the table below.
IATA noted: “…June showing that demand (measured in total revenue passenger kilometers or RPKs) rose by 7.8% compared to the year-ago period. This was in line with the 7.7% growth recorded in May. All regions reported growth.”
Through the first 1H17 the industry experienced a 12-year high in traffic growth (7.9%) and a record first half load factor of 80.7%. Which is great for airline, but not so much the passengers who are ever more squeezed. The North American load factor of 86% is something any airline flier in June can testify to. It was not a pleasant experience.
The markets that saw jumps in traffic were: Africa where traffic grew 9.9% in June, while capacity rose 7.1%, and load factor jumped to 64.3%. Asia-Pacific saw June traffic jump 9.1% compared to the year-ago period while capacity rose 7.9% and load factor edged up to 79.3%. In Europe traffic grew 8.8% in June compared to June 2016, while capacity climbed 6.5% and load factor rose to 85.9%.
But the star performer is India which saw a 20.3% rise in domestic traffic in June. The strong upward traffic growth slowed since the ‘demonetization’ in November 2016. IATA suspects that India’s streak of year-on-year double-digit traffic growth may have ended with June.
The next best performer was China where domestic traffic surged 17.6% in June, strongly ahead of the first half growth rate of 15.2%. IATA notes there is little sign of any slowdown in the traffic growth and second quarter GDP figures were stronger than expected. Air travel demand is continuing to be stimulated by supply factors, including ongoing growth in the number of unique airport-pair routes served, which ultimately translates into time savings for passengers. This is an important point because many worry about the impact of high-speed rail.
Overall IATA concludes: “Air travel recorded its fastest first-half growth in 12 years, pushing load factors to record highs. And the peak northern summer travel season is likely to be record-breaking.“
Please start here. This is huge news. Readers know that we have a significant interest in this subject. We have been concerned with the issue of cyber security as it potentially can impact the air travel process. Air travel is increasingly IT driven. We have seen what IT disruptions at American Airlines and United Airlines brought about last year. Whether these events were cyber related or not.
Any step by the industry to move on securing their systems is to be cheered. The threat no longer has to actually enter the aircraft physically if it can enter digitally.
Clearly even as the industry develops standards, it is important to understand what happens next. First once these standards are published, they become vulnerable. Second, cyber security requires ongoing, continuous improvements. Given the dependence on IT (and this will never decline), CFOs have to simply get used to CIOs always needing more resources. It’s just going to be like that. Big Data is a reality and is one of the juiciest targets.
Protecting the GPS signals as the WSJ story describes is obviously a great and good thing.
But there is another possibly even juicer target. Before we explain this, remember how hackers were able to break into the US Federal Reserve? There have been continuous attempts to hack banks. Last February hackers stole $81m from Bangladesh’s account with the Federal Reserve Bank of New York.
The world’s airlines have a club called The International Airline Transport Association (IATA). This organization performs all sorts of industry tasks. One of the most fundamental is that of clearing house. If you were impressed by the Bangladesh hack at $81m (and nobody has been caught), try this for size: IATA’s clearing house handled $54.3billion in billing transactions in 2015. Hacking IATA’s clearing house would be on any hacker’s Top Ten list.
Coming back to the industry’s heightened cyber security profile. Protecting GPS signals are an excellent start. But there are many other items the industry needs to protect. We hope the committee established becomes a permanent fixture because it has a lot of work to accomplish. Most importantly, we hope the industry can stay ahead of the threats.
Safety reports from IATA for 2015 indicate that the level of safety in the industry remains high and accident rates remain below the average of the previous five years. There were six fatal crashes in 2015, two with jets and four with turboprops. The two involving jets, Germanwings 9525 and Metrojet 9268, which accounted for 347 fatalities, are not counted in IATA statistics because the former was a pilot suicide and the latter suspected terrorism, and cannot be attributed directly to the airlines involved.
The risk of an accident from mechanical difficulties or airline operations continues to improve to a level of one in over three million flights resulting in a hull loss. The four accidents involving fatalities all involved turboprops, with 136 fatalities. Perhaps this influences the passenger preference for jet aircraft.
In one of the incidents, after an engine failure, the pilots shut off the working engine, resulting in an accident that should never have happened. With younger and less well trained pilots flying turboprops for regional operations, training and experience may influence safety.
The five year average is for 17.2 accidents and 504 fatalities annually, so the 2015 performance was well below average. Even if the 347 additional fatalities from terrorist related events were included, the total of 483 deaths was below the average of the prior five years.
Unfortunately, the two terror-related incidents reflect the nature of the industry today, coming just after two Malaysian Airlines incidents in 2014, with one airline inexplicably lost at sea and another shot down in a war zone. These incidents, unfortunately, gain substantial media attention and generate further interest in using terrorism as a weapon against airliners.
Airlines have done a great job at reducing the internal threats with better training and mechanical reliability. The agenda is now continuing to shift to security, since terror-related attacks led to more fatalities than any other source in 2015.