Economics the issue – not fuel?

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Centre for Asia Pacific Aviation reports that

the airline industry’s general exasperation about the impact of high fuel prices on profitability is increasingly unsupported by figures from its own peak industry body.

Forecast average fuel prices for the year have steadily risen by 28% since the Dec-05 IATA forecast for a USD4.3 billion industry loss for 2006. But that loss has since been cut by more than half, to USD1.7 billion, according to IATA’s latest estimate.

According to the Center’s Executive Chairman, Peter Harbison, “the improved outlook is largely due to improving fortunes in the US and Europe, as airlines enjoys solid premium demand on the back of strong economies”. US carriers reported good operating profits in 2Q06, with the prospect of more to come in 3Q06.

“The implications for Asian airlines, which are losing ground in IATA’s financial forecasts, are that premium carriers with strong US/Europe networks will do better in this environment”,

notes analysis by the Centre.

“As IATA rightly points out, a US economic downturn is the biggest risk for profitability going forward – not fuel. Initial signs of this appear in the slowing traffic growth rates of Asia Pacific airlines,”

concludes Mr Harbison.

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