Low oil prices continue to drive demand for flights
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The fall in global oil prices continues to improve the performance of the aviation industry, as lower costs are passed on to passengers in the form of lower airfares, driving demand for flights.
According to IATA’s latest Financial Monitor report, average global airfares (reported US dollar terms) fell by around 12% year-on-year in 2015 (excluding taxes, fees and surcharges) and a further 6.2% in January 2016.
And while crude oil prices rallied in late February and early March, the price of a barrel of Brent crude is still around 30% lower than this time last year. And this trend is likely to continue, with oil prices expected to remain at below US$50 per barrel until late 2019.
As a result of the upturn in passenger demand, IATA said that airlines have been adding capacity “cautiously”. The number of available seats in the global airline fleet increased 5.7% year-on-year in February 2016, and 115 new aircraft were delivered in the same month – a pick-up from the 76 delivered in January.
Airlines are also taking older aircraft out of storage, as lower oil prices and stronger demand make it economical to operate less fuel-efficient models.
The average global passenger load factor in January and February 2016 was slightly higher than it was during the same period in 2015, and well above the long-run average for the period.
And these trends have helped to boost airlines’ bottom lines’; IATA noted that net profits in the last quarter of 2015 were almost 60% higher than in the same period in 2014.
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