Third World keeps airlines aloft

31 May 2013 - 02:39 By BEKEZELA PHAKATHI
Tony Tyler, the International Air Transport Association's director general and CEO, said 'profitability is balancing on a knife-edge'.
Tony Tyler, the International Air Transport Association's director general and CEO, said 'profitability is balancing on a knife-edge'.
Image: AFP/Getty Images

The airline industry has continued to show modest signs of improvement, with global passenger traffic growing by 3.2% in April, compared with a year before.

The CEO of the International Air Transport Association, Tony Tyler, said yesterday that the industry is growing strongly on routes linked to emerging markets.

"We see strong growth for African (4.6%), Asia-Pacific (4.7%), Middle Eastern (10%) and Latin American (2.8%) airlines," he said.

The global airline industry has struggled to stay afloat in recent years, in part because of rising fuel prices.

The high cost of jet fuel has contributed significantly to the demise of some budget airlines in South Africa. Velvet Sky and 1time are the two most recent airlines to shut up shop.

Speaking at a media briefing ahead of IATA's annual general meeting next week in Cape Town, Tyler said that, because of the continuing crisis in eurozone economies, growth had been more modest in Europe, where demand increased by only 2.2%.

Growth was also slow in North America, where the market rose 0.6%. The seasonally adjusted rate for April was nearly 5%.

North America was the only region to contract, shrinking by 0.5%. The Middle East topped international demand with a rise of 10.9%.

"Global freight markets were up by only 1.4% in April after a 2.6% contraction in March.

"But if we look at the last 18 months, freight markets have been flat," Tyler said.

He said reporting a profit in the face of the continued weakness of the global economy was a major achievement for airlines.

"Razor-thin margins" are characteristic of the airline industry.

"On Monday, we will announce a revised industry outlook. Our last forecast was for a $10.6-billion profit on $671-billion in revenue. And that would be a 1.6% net profit margin," Tyler said.

"Fuel accounts for about a third of industry costs. The [association's annual general meeting next week] will certainly feature discussion on how airlines are improving their performance to make profits in such a difficult environment."

subscribe