Air fares will keep rising and carriers face a profitability slump as a result of war in the Middle East, but airline industry research has some good news for the travel trade.
The International Air Transport Association says airlines’ profit will plunge to USD23 billion this year, nearly half the previously projected USD41 billion. The association says margins have tumbled as a result of the oil shock to USD4.50 per passenger, which IATA boss Willie Walsh says won’t even buy a hot dog at most FIFA World Cup venues.
All airlines’ profitability is suffering from the rapid 70% rise in jet fuel prices. Smaller carriers that started the year with weak balance sheets are certainly struggling, shows the IATA research. At a regional level, all are in the black but with sharply reduced financial performance, with the exception of those in the Middle East.
. . . Travellers Positive
The airline association says that while airfares have risen in response to higher fuel prices, average real return air fares in all countries are 26.3% lower than in 2016.
An IATA poll in Apr found that traveller confidence remains high even with a proliferation of conflicts, including war.
Overall, 41% in the international survey say they were planning to travel more in the coming 12 months. Some 91% say that flying is safe, with 85% saying it is safer today than ever.
Just on 86% are saying they check government travel advisories when booking and 81% are concerned about disruptions due to geopolitical conflict.
. . . NZ’s Plans
Speaking to Reuters at the association’s annual gathering (this year in Rio de Janeiro) Air NZ ceo Nikhil Ravishankar says the airline will look at further tactical fare hikes on routes where demand is strong. He says fare increases already imposed have only offset between 25% and 40% of higher fuel prices. NZ, which will soon release the results of a sweeping strategic review, will use cost cuts, supplier negotiations, fare increases and capacity reductions to cope with continued high fuel prices, he told Reuters.
