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| A350 - (Picture: Airbus.com) |
IATA's (International Air Transport Association) April/May Monthly report on the health of the global airline industry just out, shows that oil prices have in fact eased back to the levels last seen in December 2011 and 12% lower than for the period February/March this year. In the US this has meant that airlines have improved their profitabily through a combination of lower (dollar) fuel costs and increasing passenger demand. By limiting the increase in the number of seats available in the face of rising demand, US airlines have achieved good load factors.
In Europe the Eurozone crisis has put the currency under pressure versus the dollar. Hence the drop in fuel costs (which are priced in Dollars) has been somewhat offset by the weaker Euro and the Eurozone crisis. Globally, in terms of profitability only US airlines have fared better in the first quarter 2012 than in Q1 2011.
The Saudis have made good their promise to increase production and this has taken the pressure off crude oil. Brent Crude the benchmark price for crude oil broke the $100 barrier to fixe under $100 for the first time in 240 days. The consequences of the threatend embargo on Iranian Oil in July is obviously an unknown factor which could well put oil into an uptrend again. However, for the timebeing, if recovering worldwide passenger demand (an above 20 yr trend of 6%) continues plus cheaper fuel, should airlines resist increasing seat availability and maintain viable load factors, they may just improve profitability despite softer airfares around the world.
I had long ago learned that when you are the giant, alien visitor to a remote and foreign culture it is sort of your job to become an object of ridicule. It’s the least you can do, really, as a polite guest.
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