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Rising fuel prices dampening air travel, says IATA

Rising fuel prices dampening air travel, says IATA

Rising fuel prices are starting to dampen air travel demand, according to the latest report from IATA, but business travel is maintaining a strong recovery.

Economy travel slowed from 4.9% year over year growth in January to 3.3% in February. Premium travel was more robust, slowing from 8.1% in January to 7.7% in February.

There were also adverse impacts from the civil unrest in a number of North African and Middle Eastern nations in February, and a distortion caused by the Chinese New Year that began much earlier in the month this year.

The more robust premium travel segment was driven by strong business travel demand. World trade was buoyant through to February and this has been an excellent coincident indicator for premium air travel. Business confidence, which usually leads changes in premium travel by several months, moved upwards to a near record level in February. This market segment is usually less sensitive to price and economic conditions were still clearly providing significant upward momentum in February.

Economy travel volumes appear to have been trending downwards since October. The seasonally adjusted number for economy seats was 2% lower in February 2011 than in October 2010. There has been some loss of consumer confidence in Europe and in China but the US consumer experienced a sharp rise in confidence between October and February. The 34% rise in jet kerosene prices over that period and the impact on travel costs may now be causing price-sensitive passengers to cut back on air travel.


The next few months at least will see air travel adversely hit by a further surge in fuel prices and unrest in MENA, the impact of the Japanese earthquake and a fall, hopefully temporary, in business confidence during March. Most economic forecasts see these as temporary setbacks to continued expansion, with IATA predicting that travel growth should resume.