International air travel growth to ease

Growth in international air travel is likely to cool over the next several months as airlines boost their ticket prices to pay for higher fuel bills, the International Air Transport Association said last week.

Signs of slowing demand are already evident. For February, higher ticket prices appear to be discouraging people from booking holidays overseas, with economy-class seating growth slowing to 3.3% year over year from 5% in January.

"Economy travel volumes appear to have been trending downwards since October," the Geneva-based trade group said in the report.

"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."

Airlines have raised their international air fares in the past months and added surcharges to pay for the higher fuel expense. Qantas boosted its one-way fuel surcharge by 52% to $303 last week, while British Airways raised its fee to a range of $150 to $170.

A similar trend appears to be occurring on the domestic front. Airlines reported more empty seats in March and several failed attempts to raise ticket prices.

"The next few months at least will see air travel adversely hit by a further surge in fuel prices and unrest in [the Middle East and North Africa], the impact of the Japanese earthquake and a fall, hopefully temporary, in business confidence during March," IATA said.

"Most economic forecasts see these as temporary setbacks to continued expansion," the group added. "If so, travel growth should resume."

The latest data from IATA was applauded by Wall Street analysts, satisfied that more premium-class ticket-holders were travelling, despite the higher prices. Premium seating accounts for about 10% of passenger numbers, but contributes 30% of revenue, according to Gleacher and Co.

International premium traffic rose 7.7% in February from a year ago, decelerating from an 8.1% year-over-year climb in January, IATA said.

"Improvements in premium traffic indicate that the recession in premium travel has proven to be only cyclical ... which is very positive for the industry given premium's contribution to overall revenue," said Gleacher and Co analyst Peter Arment.

 

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