Why fewer aircraft deliveries in August slowed capacity growth

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Nov. 26 2019, Updated 9:22 p.m. ET

Slow growth

Airlines increase capacity by adding more aircraft to their fleet. In August, as we saw in Part 2 of this series, the rate of growth in capacity was lower compared to demand growth. The slow growth in capacity during the month was due to fewer deliveries of new aircraft and an increase in storage activity. In August, there were fewer new aircraft deliveries (115 new aircraft deliveries in August compared to 127 in July) but more aircraft in storage (net 25 aircraft in storage in August compared to 22 in July).

Part4_Airline fleet development_Capacity

Higher load factor in North America

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Rising demand and slowing capacity growth led to a 0.3% higher load factor in August. Although growth in capacity and traffic in North America was lower than in other regions, the load factor in the region was 87.6% in August. This was the highest among airlines in all other regions and higher than the global utilization rate of 83.9%.

In 3Q14, the load factors of six major U.S. airlines—Delta (DAL), American (AAL), United (UAL), Alaska (ALK), Southwest (LUV), and JetBlue (JBLU)—ranged between 84.4% and 86.4%. ETFs that hold these airline stocks include the iShares Transportation Average ETF (IYT) and the SPDR S&P Transportation ETF (XTN).

Load factor reflects efficiency in utilization of capacity. Europe had the second-best utilization rate of 86.5%, followed by 83.2% for the Middle East, 80.8% for Latin America, 80.1% for Asia-Pacific, and 75.2% for Africa.

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