25 Aug

Review: Q1 and Q2 aviation results

Time is flying fast and already half a year passed so it is time to look at the aviation industry performance during the two quarters of 2014. We have looked into the consumer information, regional industry growth or decline, as well as any aircraft type changes by region that happened during the first half of the year.

According to IATA and AviaAM Leasing quarterly reports that were released in June, airlines are experiencing the seasonal summer growth in passenger traffic, particularly in international destinations. Overall passenger traffic growth in the world is increasing at an average of 4,7%. Current expectation is for air transport to reach 1% of world’s GDP in 2014 and be valued at $750 billion.

Regions that are showing slight increase in passenger traffic, despite still rather fragile global economy, are North America and Europe that experienced 4,4% and 6,1% increase respectively. Regions that are currently experiencing the most exciting time are Middle East and Latin America, with 14,66% and 6,12% increase in passenger traffic respectively. Latin America’s major driving forces in the first half of 2014 are progressing local economies of Chile, Colombia, Mexico, Peru and Uruguay, as well as Brazil which hosted 2014 FIFA World Cup. Despite this seasonal event, Brazil is one of the largest, however weakest economies of Latin America, which was hurt even more by the decline in U.S economy that dropped by 2,9% in Q1 of 2014 (the largest decline since 2009).

China’s passenger traffic market is experiencing slower growth than forecasted and is increasing at 7,5% rate. This is causing the entire Asia Pacific region growth to slow down. However Africa is the most concerning region with under 2% growth and a lot of unrest. All the regions of the world have been negatively influenced by the distress caused by the conflicts in Ukraine, Palestine and Israel, Iran, political distress in Turkey and African countries. Therefore, the expected and forecasted regional growth in passenger traffic and airline development will be a lot slower due to the negative factors that are impacting the global economy.

In order to be able to serve all the passengers that desire to travel, airlines are making a number of new aircraft purchases and leases. This year, commercial airlines will receive 1400 new aircraft which totals up to $150 billion in industry investments. These significantly large numbers are caused by the ever rising fuel prices which forces airlines to invest in more fuel efficient and newer airplanes. Therefore, more than half of this year’s new aircraft deliveries will replace and retire old aircraft. This year Airbus received 195 orders for A320 and 123 order for A321 models. Boeing is right there with Airbus, receiving 221 orders for Boeing 737-MAX and 91 orders for Boeing 737-800 models. To sum up the aircraft transactions (sales, delivery, lease and retirement) in the second quarter of 2014, the global aircraft fleet dropped by 4,1% which totals up to 399 less aircraft in the market. The drop is most significant in Asia Pacific with 175, Europe – 186, and Middle East – 38 less operating aircraft.

To sum up the passenger traffic and aircraft manufacturing and transaction numbers it is apparent that world distress events and fragile economic development and growth are having a big impact on aviation market. As short-term numbers are showing satisfactory results, however if the significant world events that are happening today will continue, world economy will subsequently impact the long-term aviation industry development.