While the slumping crude price has roiled markets in recent months, it has provided a boon to the global airline industry.
According to the data provided by the International Air Transport Association (IATA) overnight, global air travel rose by 5.9% in the year to November 2015, down on the 7.1% rate seen in October but still above the 10-year average growth rate of 5.6%.
The metric IATA uses is revenue passenger kilometres, or RPKs – simply a figure that multiplies the number of revenue-paying passengers by distance travelled.
Domestic air travel increased by 6.4% over the year to November, marginally shading international air travel which grew by a smaller 5.6%.
Falling travel costs, something that has no doubt been assisted by the slumping crude price, helped to offset softening global economic conditions and declining business confidence.
The growth trend remains robust, despite some softening in global economic growth. The reason is that air travel has been boosted by a significant fall in the real cost for passengers. For the first 10 months of 2015, there was a 5% fall in average fares in currency adjusted terms. According to our Air Travel Demand study, assuming an average elasticity of demand of 0.6, we estimate that the fall in fares has supported a rise in air travel of about 3.0% points, offsetting some of the weakness in confidence.
Here’s the breakdown on international passenger growth by region, courtesy of IATA:
And for domestic travel:
Despite the modest deceleration in passenger growth, IATA suggest that this will likely prove to be a temporary blip.
“Although below the October rate of 7.1%, this largely was owing to the impact of factors that are expected to be short-lived, including the cessation of operations by Transaero, Russia’s second largest carrier, and labor strikes at Lufthansa” wrote IATA.
Not only that, the group predicts that demand is likely to remain strong in the months ahead.
“Despite the recent moderation in economic activity in a number of emerging markets, particularly China, improved conditions in developed economies, combined with the fall in oil prices since mid-2014, is expected to support growth in demand for passenger travel into the New Year.”
With fuel costs continuing to diminish and passenger growth running above its long-run trend, it’s little wonder that the global airline industry is enjoying a stellar period at present.