Growth in Air Transportation Aided by International Trade

The aerospace sector is experiencing a strong market cycle, propelled by a changing air-freight market and a record number of passengers.

The aviation market has been doing exceedingly well during the current market cycle, led by a nine-percent growth in air freight in 2017, while passenger growth reached a multi-year record according to recent data from the International Air Traffic Association (IATA). Overall, air transport demand grew at more than twice the rate of global economic trade in 2017. With the International Monetary Fund’s (IMF) World Economic Outlook Report released in April 2018 projecting world-wide economic growth of 3.9 percent in 2018 and 2019, air transportation is likely to enjoy additional years of robust growth. This strong international growth has been a boon for both the passenger and freight markets, though IATA data show that the freight side of the market is and has been the largest driver of growth in the aerospace industry.

According to IATA’s data, global air freight in February 2018 was up a seasonally adjusted 7.7 percent in freight tonne kilometers compared to a year ago, and capacity during that period grew by 5.6 percent. Moreover, the underlying data indicates that the nature of the air-freight market has been transforming thanks to non-scheduled freight traffic – the chartered use of the whole aircraft for on-demand service to any location. In the nearly 20 years between 1996 and 2017, non-scheduled air-freight traffic grew from 40 to 60 percent of all air-freight traffic. Much of the recent growth in this traffic is a result of the growth of e-commerce and international trade, which will continue to be a major source of demand for air freight, propelling its growth in the market. Based on IATA’s own data analysis, freight-capacity growth in 2017 was frequently outpaced by a factor of two to three since 2017.

Moreover, the comparatively slower growth in passenger travel in the United States is by no means sluggish. The U.S. Department of Transportation reported in March 2018 that airlines serving the United States carried a record 965 million scheduled service passengers, up 3.4 percent from the 2016 record. Additionally, the total passenger growth in the five years ending with 2017 was 19 percent, and in other parts of the world, air passenger travel is outpacing freight. For example, passenger demand in China over the last five years grew faster than freight, with 2016 and 2017 passenger growth at 17.1 and 15.4 percent, respectively, while freight during the same years grew at 9.0 and 7.2 percent.

Reports

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