Global airline industry
The global airline industry showed persistence, continuing to report positive growth in traffic and capacity in September. However, the pace is slower than in August. According to the International Air Transport Association (or IATA), share prices of global airline companies were up by 6% in October compared to September, after falling by 4% in September.
The Worldwide Airlines Index outperformed the market with a higher growth compared to just 1% growth in FTSE Global All Cap index. Share prices of US airlines reported the highest growth, but European airline share prices are declining. Four of the top six airlines by scheduled passenger kilometers were US airlines. United (UAL) had the highest traffic, followed by Delta (DAL), Emirates, American Airlines (AAL), China Southern Airlines (ZNH), and Southwest Airlines (LUV).
Airline industry performance in September
- Passenger traffic growth slowed in September 2014 to 5.3% from 6.3% in August. Overall growth in demand was slightly higher than supply.
- The Middle East region reported the highest growth in international passenger traffic.
- In the Asia-Pacific region, India reported the highest growth in domestic traffic, and China continues to struggle with depreciating currency.
- Europe and Latin America slowed on weakening economies.
- There was an increase in both premium and economic travel. Premium travel was driven by growth in long-haul markets.
- Higher aircraft deliveries were reported, and Europe and North American airlines reported higher load factor than the industry average.
- Air freight traffic increased by 5.2% and capacity increased by 3.8%. The air cargo market was impacted by lower utilization and yield.
- North American airlines continue to drive the profitability of the global airline industry in 3Q14.
The airline industry provided 58 million jobs and contributed ~$2.4 trillion in GDP. This is expected to increase to 105 million jobs and $6 trillion in GDP in 2034. As air passenger traffic increases, the value of tourism spending is expected to increase by 5.2% in 2014.
Apart from higher returns on transportation ETFs such as the iShares Transportation Average ETF (IYT) and the SPDR S&P Transportation ETF (XTN), the improved performance of airlines also benefited these governments by adding to their tax revenues.