International passenger traffic in August grew more slowly than in the previous seven months, resulting from the impact of extremely high fuel prices, according to the International Air Transport Association. Based on IATA statistics released today, August traffic grew 6.1 percent, year over year, compared with the 8.3 percent growth measured for the calendar year to date.
"While we have tracked a softening cargo market since the beginning of the year, this is the first indication of a slower demand for passenger services," said Giovanni Bisignani, IATA director general and CEO. "It appears that consumer confidence is being damaged by the rise in oil and gasoline prices."
Traffic growth in August was weakest in Europe and Asia/Pacific, at 5 percent and 5.8 percent, respectively. Growth in Latin America, the Middle East and Africa was measured above 8 percent. North American traffic experienced a 7 percent increase, versus 10 percent year to date.
The price of fuel is impacting other sectors, including rail. In fact, Amtrak starting next week will impose fare hikes of up to 7 percent on many trains, and also will begin to use revenue-management techniques to match supply and demand in the Northeast Corridor.
Next year, such corporate travel components as meals and ground transportation also likely will cost more, according to recent industry reports
(BTNonline, Sept. 26).
Meanwhile, domestic U.S. carriers also are expected to continue raising fares to offset jet fuel costs, as international carriers apply higher fuel-related surcharges on passenger tickets.
Exacerbating the historically high cost of crude oil, fuel hedges in place at many carriers--meant to protect airline companies from oil price fluctuations--will continue to wind down through 2006. According to a recent Bear Stearns report referenced during a U.S. House of Representatives aviation subcommittee hearing this week, only four U.S. carriers have meaningful hedges in place for next year--AirTran, Alaska, America West and Southwest. Southwest's hedge position remains the most enviable in the industry, as it has locked in 65 percent of its 2006 fuel needs at a price equivalent to $32 per barrel of crude oil.
Crude oil this morning was trading on the New York Mercantile Exchange at just above $66 per barrel, down roughly 50 cents from yesterday's close.