High Fuel Prices Hurt Growth In Global Passengers, Cargoes - IATA

Manila Bulletin
May 7, 2012
By Emmie V. Abadilla

Global passenger demand rose 7.6% and freight demand climbed 0.3% in March versus the same period last year when the Arab Spring disrupted travel in the Middle East and North Africa, the earthquake and tsunami in Japan slowed down travel across Asia-Pacific.

In the absence of these events, year-on-year air travel would have risen 2 percentage points higher, the International Air Transport Association (IATA) estimated.

On the other hand, the timing of the Chinese New Year, which occurred in January this year, affected cargo demand, leading to stronger March 2011 shipments and weaker year-to-year comparisons.

Compared to February 2012, March air cargo demand was significantly stronger by 2.2%.

“If we discount the industry’s growth by two percentage points as a result of the extraordinary events in 2011, airlines still managed to expand by 5-6%,“ observed Tony Tyler, IATA’s
Director General and CEO.

“Given the prevailing economic conditions with some European states returning to recession, passenger demand is holding up well.

But this is bringing little relief to the bottom line because yields are not keeping pace with the continued very high price of oil,” he added.

Oil prices have remained above $100/barrel (Brent crude) for the past 14 months. In 2008, oil prices rose from $90/barrel in January to a peak of $147/barrel in late July. But by November, they had fallen back to less than $50/barrel.

“We have not seen such sustained high oil prices previously. Jet fuel prices have risen 8% since January.

Considering that fuel now accounts for 34% of average operating costs, it’s an increase that hurts,” Tyler remarked.

Total passenger capacity rose 4.4% compared to March 2011, resulting in a load factor of 78.3%, up 2.4 percentage points over the year-ago period. Freight capacity, however, climbed 1.7% year-on-year, above the
rate of demand, placing pressure on load factors.

International air travel rose 9.6% in March compared to the year-ago period, while capacity climbed 5%, resulting in a load factor of 77.7%, up 3.2 percentage points from March 2011.

European airlines recorded the strongest traffic growth among the major regions despite deepening recessions in parts of the continent, with demand up 8.8% year-on-year, on a 4.1% increase in capacity.

Load factor rose to 78.5%. This growth is partly the result of expanding European exports to stronger Asian economies and the associated business travel.

Asia-Pacific carriers also experienced healthy growth, with demand up 8.1% on a 4.3% rise in capacity, pushing load factors up to 76.5%.

Year-to-year comparisons were impacted by the March 2011 Japan earthquake and tsunami, which are estimated to have reduced 2011 demand by 3%, exaggerating year-overyear growth by a like amount.