x Abu Dhabi, UAEMonday 24 July 2017

Brighter mood as airlines gather

Aviation trade group's annual summit comes with fuel costs down and demand up, especially in the Middle East.

Passengers walk through Berlin's Tegel airport. The International Air Transport Association will open its annual general meeting in Cape Town, South Africa, today. Adam Berry / Getty Images
Passengers walk through Berlin's Tegel airport. The International Air Transport Association will open its annual general meeting in Cape Town, South Africa, today. Adam Berry / Getty Images

The global aviation industry's better-than-expected financial performance last year has prompted a mood of quiet optimism among the world's leading airline executives as they gathered in Cape Town yesterday for their annual summit.

The International Air Transport Association (Iata), which represents 240 carriers, will open its annual general meeting in the South African city today against a backdrop of improving passenger numbers and lower fuel costs in a trend that could begin to nudge many struggling airlines back into profit.

Fuel accounts for a third of airline costs, and last year with North Sea Brent crude prices peaking at US$118 per barrel, Iata delivered a gloomy picture of the industry's future. Since then, the cost of a barrel of oil has fallen to US$100, raising the prospect that Iata will hike its influential profit forecast.

Iata has already revised its industry profit prediction to $10.6 billion this year.

Speaking before the opening of today's conference, which will be attended by more than 700 airline delegates, Tony Tyler, Iata's director general and chief executive, said that airlines were noticing "modest signs of improvement" as traffic grew sharply in emerging markets, offsetting Europe's debt crisis and a hesitant pick-up in North America.

Iata's latest survey showed global passenger traffic for April up 3.2 per cent over the same month last year, with emerging markets continuing to lead air travel growth, but with all regions reporting year-over-year gains. "Passenger demand continued to grow in April, extending the positive trend that has been developing since late 2012," said Mr Tyler. "The increase, however, is concentrated in emerging markets. Airlines in Europe and North America reported a modest expansion compared to the strong growth seen in Africa, the Middle East and Asia.

"While economic developments in Europe and the United States certainly bear watching, most indicators continue to signal further expansion in air travel."

Demand for Middle East carriers rose 10.9 per cent over last year, by far the strongest among all the regions. But capacity rose 12.9 per cent, pushing down load factor 1.4 percentage points to 76.8 per cent.

Globally, capacity rose 4.4 per cent on the previous April, which was slightly ahead of demand. This pushed the industry load factor down by 0.9 percentage points to 78.1 per cent. But if adjusted for the impacts of seasonality, the load factor remained near record highs of 80 per cent, said Iata.

The European Union has pledged to reintroduce a controversial emissions trading scheme opposed by a group of other countries unless everyone can agree on a global system.

But little progress has been made in a United Nations effort to craft an agreement to lower emissions from international air travel, raising doubts that a September target date can be met.

Failure to agree has given the airline industry itself a slim window of opportunity to forge a common position and seize the initiative before the UN's aviation body meets in September.

But airlines appear to be split over who should pay the most if the world does manage to come up with a market-based scheme for taxing emissions deemed harmful to the environment.

Airlines in the Arabian Gulf and Asia are growing at a much faster pace than those in the mature European and North American markets.

One of the industry's most sensitive topics is whether the whole industry should underwrite its goal of carbon-neutral growth or if those growing the most should also pay the most.

Iata has said it would seek the "fairest possible agreement" at its annual summit and was urging airlines to compromise or have their fate controlled by a jumble of uncoordinated policies.

 

dblack@thenational.ae

* With Reuters