Saturday 22 September 2018

Turbulence ahead for airlines despite global demand rise

Stock image
Stock image
John Mulligan

John Mulligan

Global air passenger demand jumped 6.1pc in May, as capacity rose 5.9pc, according to the International Air Transport Association (IATA).

But it said that rising airline costs are reducing the stimulus for lower airfares. Jet fuel prices are likely to rise 26pc this year.

IATA predicted last month that the world's airlines will make a combined $33.8bn (€28.8bn) net profit this year.

"But our buffer against shocks is just $7.76," said IATA director general Alexandre de Juniac. "That's the average profit per passenger that airlines will make this year-a narrow 4.1pc net margin."

He said that there are "storm clouds on the horizon" for the world's airlines, including rising cost inputs, growing protectionist sentiment, the risk of trade wars and geopolitical tensions.

"Aviation is the business of freedom, liberating people to lead better lives," he said. "Governments that recognise this will take steps to ensure aviation is economically sustainable. And aviation works best when borders are open to trade and people."

European airlines saw passenger demand rise 6.2pc during May compared to a year earlier, which was above the 3.4pc annualised growth recorded in April.

Capacity in the region was 5.1pc higher, and the load factor, or percentage of available seats sold, edged 0.8 percentage points higher to 83.5pc. That was the highest load factor of any region in the world.

"Despite the impact of strikes in the region and mixed signals regarding the economic backdrop, traffic growth is healthy," according to IATA.

In Asia-Pacific, traffic rose 8pc in May year-on-year, compared to an 8.1pc increase in April. Capacity in the region was 7.6pc higher.

Irish Independent

Business Newsletter

Read the leading stories from the world of Business.

Also in Business