Last updated: 01:50 AM ET, Mon October 29 2012

IATA Reports Air Travel Up But Threatened by High Oil Prices

Features & Advice International Air Transport Association (IATA) Kate Rice May 02, 2012



Global air traffic increased 7.6 percent in March, according to the latest figures from the International Air Transport Association. But part of that increase is due to fact that last year’s results were dampened by the chilling effect the Arab Spring and the earthquake and tsunami in Japan. If it weren’t for those events, traffic would have increased just two percentage points, according to IATA estimates.

That’s good news and bad news, according to Toby Tyler, director general and CEO of IATA. The good news is that airlines still managed to expand 5 or 6 percent. But little of that is going to airlines’ bottom lines because airline yields can’t keep up with oil price increases. Oil has been above $100 per barrel for the past 14 months. In 2008, the last time oil prices soared so high they went from $90 a barrel in January, peaked at $147 a barrel in late July but then dropped to under $50 in November.

“We have not seen such sustained high oil prices previously,” Tyler said. “Jet fuel prices have risen 8 percent since January. Considering that fuel now accounts for 34% of average operating costs, it’s an increase that hurts.”

In March, total airline passenger capacity rose 4.4 percent compared to the same month last year, resulting in a load factor of 78.3 percent, up 2.4 percentage points over the year-ago period. Freight capacity climbed 1.7 percent year-on-year, above the rate of demand, placing pressure on load factors. International air travel rose 9.6 percent in March compared to the year-ago period, while capacity climbed 5 percent, resulting in a load factor of 77.7 percent, up 3.2 percentage points from March 2011.

European carriers are seeing the strongest traffic growth despite the region’s economic problems, demand was up 8.8 percent, and capacity was up 4.1 percent. Load factors rose to 78.5 percent. Asia-Pacific carriers also showed healthy growth, with demand up 8.1 percent on a 4.1 percent increase in capacity and load factors up to 76.5 percent. These carriers, however, were affected the most by the tsunami and earthquake in Japan last year, so that exaggerated their growth by about 3 percent, IATA estimates.

Middle East carriers saw the biggest demand increase -- 20.9 percent with a 12.4 percent rise in capacity and load factors of 78.7 percent. But much of that was because the Arab Spring hurt travel to the region last year. Meanwhile, North America saw a 5.3 percent rise in passenger traffic in March, which IATA called a solid performance that reflects an improving economy and increased consumer confidence.