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Worldwide airline traffic is growing at the slowest pace in five years as terrorist attacks weigh on demand, with Europe being hurt the most, the International Air Transport Association said.
Passenger demand, measured by revenue for each seat flown a kilometer, grew at an annualized rate of about 3.5 percent in the first half, the industry group said in a report Thursday. IATA represents about 260 airlines making up 83 percent of global air traffic.
“The fragile and uncertain economic backdrop, political shocks and a wave of terrorist attacks are all contributing to a softer demand environment,” Tony Tyler, the group’s chief executive officer, said in the report. He added that it’s “too soon to know” whether recent terrorist attacks, such as the ones in Istanbul and Nice, France, would have a long-term impact.
Airlines have been plagued by high capacity and reduced fares that have caused unit revenues to decrease for more than a year. United Continental Holdings Inc., American Airlines Group Inc. and Delta Air Lines Inc. are among carriers that in recent weeks announced they are trimming growth plans to try to curb the overabundance of flights and seats.
U.S. airline shares fell on Tuesday after Delta announced that passenger revenue for each seat flown a mile dropped 7 percent in July. the Bloomberg U.S. Airlines Index has declined about 20 percent this year.
Global traffic rose 5.2 percent in June. Europe saw the lowest increase in the month, 2.1 percent, because of the attacks and uncertainty following Britain’s vote to exit the European Union, IATA said. The Brexit vote is expected to continue to weigh on the market in coming months, the group said.
To contact the reporter on this story: Dagney Pruner in New York at firstname.lastname@example.org.
©2016 Bloomberg L.P.
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