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Did Passenger Traffic Grow in April 2015?

US Airlines Enjoy Profitable Growth in 1Q15

(Continued from Prior Part)

Airline demand

Airline demand can be broken down into two segments: passenger traffic and freight volumes. Airline demand is measured by revenue passenger miles (or RPM) and is calculated as the number of revenue passengers multiplied by the total distance traveled.

Passenger traffic

Global volumes in passenger traffic rose by 5.9% in April 2015, compared with 7.7% in March 2015. This growth came from various regions.

On the international front, growth came from four regions. The Asia-Pacific region grew by 9%, Europe grew by 3.7%, the Middle East grew by 8.2%, and Latin America grew by 6.3% in April 2015, year-over-year (or YOY). North American carriers witnessed nearly flat growth of 0.7%, and growth for African carriers dropped by 3.2%.

In April 2015 YOY, demand in India grew by 20.7%, followed by 15.5% growth in China, and 6.4% in Japan. Demand in Russia and Australia remained nearly flat at 1.7% and 0.1%, respectively.

Domestic demand in the US grew by 4.3% in April 2015 year-over-year, which is higher than the 3% growth seen in March 2015. However, the growth seems to be strong given the 1Q15 softness in GDP. Among the six major US airlines that account for ~78% of the country’s domestic market share by RPM, Alaska Airlines (ALK) had the highest mainline domestic RPM year-over-year growth of 9.86% in April 2015. JetBlue (JBLU) and Southwest (LUV) followed with 8.95% and 8.55%, respectively, Delta Air Lines (DAL) had 4.36% growth, American Airlines (AAL) had 1.46% growth, and United Continental (UAL) had 1.15% growth. Low-cost carriers continue to lead the way in terms of growth.

These airlines are part of many ETFs, including the iShares Transportation Average ETF (IYT), with 38% of its holdings in airline stocks, as well as the PowerShares DWA Consumer Cyclicals Momentum Portfolio ETF (PEZ), which has 5.59% of its holdings in airline stocks.

Air cargo demand

In April 2015, global air freight volumes were up by 3.3%, compared with April 2014. This was lower than the 4.3% year-to-date growth in freight volumes and suggests initial signs of a slowdown. However, April’s readings provide a clearer picture of air freight movement, after the impact of the holiday season in 1Q15.

The flattening of demand was due to a slowdown in the Asia-Pacific markets. Growth in this region slowed to 4.5%, compared with the YTD growth of 7.3%. This slowdown was due to an adverse economic climate in Europe, which led to reduced demand for manufactured goods to be shipped from the Asia-Pacific region.

European airlines recorded a 0.3% YOY contraction in air freight volumes in April 2015. By contrast, the Middle East region showed a strong growth trend of 14.1% YOY.

Continue to Next Part

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