Worldwide airline share prices were up 9% in October compared to September, supported by low jet fuel prices and strong Q3 profit results. Airline shares outperformed the broader market, which was up 7% over the month- reveals the latest Airlines financial monitor by The International Air Transport Association (IATA)
According to the report, broader equity markets were also up, supported by the low interest rate environment and rebounds in the Chinese stock market.
But airline shares outperformed the broader market, with the FTSE Global All Cap rising 7% over the same period. The strong rise in airline share prices was supported by robust Q3 financial results as well as continued low fuel prices. Airline share prices in all major regions were up in October, but rose most in the US, with an increase of 12% over the month.
Air transport volumes increased again in September, sustaining the robust growth trend after a moderation mid-year. Weakness in some emerging markets, including China, has been placing downward pressure on global economic growth. However, growth in RPKs, particularly the more price sensitive economy class leisure travel, has received some help from lower fares
Air freight volumes expanded in September compared to August. The pick-up is a welcome change after months of decline throughout 2015. That said, the improvement was narrowly based – driven mostly by European airlines – and the demand backdrop remains fragile due to weakness in emerging markets.
Growth in seats
Growth in available seats slowed considerably in September, down to a 0.2% rate of increase compared to August. Although new aircraft deliveries went up in September (132), compared to August (120), there was a net increase in storage activity over the period, from 23 in August to 51 in September. Growth in the number of seats slowed to a 2.5% annualized rate in September, which is well below the current growth in demand and should help boost loads and aircraft utilization rates.
Passenger loads dipped
Passenger load factors slipped slightly in September after reaching a record high in August – 80.6% on a seasonally adjusted basis. The small decline in seasonally adjusted load factors resulted from a stronger pick-up in capacity compared to demand. But generally, over the past several months, load factors have been improving due to gains on domestic markets.
Cargo load factors were broadly stable in September, supported by the expansion in FTKs. Air freight load factors have been in decline since Q1 2015, down to levels not seen since mid-2009, on a seasonally adjusted basis.
Crude oil prices have been averaging just below $50/bbl level since the most recent rally in July, when the price rose to $65/bbl. The recent weakness in crude oil prices has brought the average so far in 2015 down to $56/bbl.
The recent lows in crude oil prices reflect expectations of supply increases from Iran and the US. In addition, the demand outlook has weakened with slower than expected global economic growth, especially in key economies like China.
In September, US passenger yields were down 4% year-to-date. The weakness in yields likely reflects downward pressure from declines in fuel costs.
In US$-terms average global fares were down 13% in the first 8 months of this year, compared with the year ago period. However, if we hold exchange rates constant to eliminate the translation effect of the stronger US dollar, global fares were down 6% over the same period. The US dollar’s appreciation is exaggerating the downward pressure on fares, but there is still some underlying downward pressure evident.