IATA: Air Demand Up Despite High Oil Prices

Total passenger demand rose 7.6 percent in March compared to the same month last year, the International Air Transport Association (IATA) reports. International air travel rose 9.6 percent in March compared to the year-ago period, while capacity climbed five percent, resulting in a load factor of 77.7 percent, up 3.2 percentage points from March 2011. Domestic markets grew at less than half the rate of international markets at 4.5 percent, IATA says.

Comparisons with March last year are affected by events that depressed passenger demand in 2011, including the Arab Spring, which disrupted travel in the Middle East and North Africa beginning in February 2011 and the earthquake and tsunami in Japan in March 2011 that impacted air travel across the Asia-Pacific region. IATA estimates that the year-on-year rise in air travel in March was about two percentage points higher than it would otherwise have been in the absence of these events.

“If we discount the industry’s growth by two percentage points as a result of the extraordinary events in 2011, airlines still managed an expansion in the range of five to six percent. 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,” said Tony Tyler, IATA’s director general and CEO.

Oil prices have remained stubbornly above $100/barrel (Brent crude) for the past 14 months, IATA says. 

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

North American airlines had a 5.3 percent rise in passenger traffic, a solid performance for the region and concurrent with better economic results from the U.S., particularly with increasing consumer confidence, IATA says. Capacity rose at a much slower rate than demand, by 0.9 percent, pushing load factors up fractionally to 80.3 percent, the highest of all the regions. Very tight capacity control in this region is allowing airlines to boost asset utilization, helping to offset part of the rise in fuel costs. March domestic traffic rose 1 percent, but capacity contracted 0.7 percent, pushing load factors to 84.3 percent, the highest for any market, IATA reports.

Visit www.iata.org

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