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Iata: Oil prices hit airlines hard

May 02 2012 17:22 James Styan

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Cape Town - Airlines globally are struggling under the pressure of high and sustained oil prices. Industry body the International Air Transport Association (Iata) has just released its global traffic results for March, showing that total passenger demand rose 7.6% and freight demand climbed 0.3% compared to the same month last year.

“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.

Iata says globally, the total passenger capacity rose 4.4% compared to March 2011, resulting in a load factor of 78.3%.

African airlines reported a 14.3% rise in traffic, of which an estimated 11 percentage points was attributed to traffic suppression in March 2011 owing to the Arab Spring.

Capacity rose 10.7%, resulting in a load factor of 64.8%, which although an improvement year-over-year, was by far the lowest among the regions

Iata represents some 240 airlines comprising 84% of global air traffic.

While airlines are struggling locally, the large taxi association, Santaco, insists it’s still planning to launch its own low-cost airline.

Philip Taaibosch, secretary general of Santaco, told Fin24 that the airline is still very much part of Santaco’s future plans.

“We’re simply biding our time and waiting out the current economic storm.”

Taaibosch said Santaco is hoping to launch its airline in March 2013.

“But for now we’re still doing our calculations. Look, it’s definitely not a case of are we going to do this, it’s still a case of when.”

Carriers in South Africa are under increasing cost pressure, with record oil prices impacting on margins that are already under pressure.

Oil prices globally have remained above $100/barrel for the past 14 months. This is not the first time the industry has had to battle high fuel costs though.

Iata said 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.

“(But) 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,” said Tyler.
airlines  |  iata


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