International air passenger traffic grew 6.7% in the first half of 2006 compared to 2005, and international air freight traffic increased 5.2% over the same period, according to the International Air Transport Association (IATA). In June, the passenger load factor rose to 78.3%, more than 1.5 percentage points higher than June 2005.
Despite operational improvements and revenue growth, however, the airlines are still losing money mainly due to the spiraling cost of fuel.
The bottom line is all about oil. Prices continue at near record levels and we expect a fuel bill of US$112 billion this year at an average price of US$66 per barrel. Increased political instability in the Middle East does not bode well for a price drop any time soon. The good news is that neither the extraordinary price of oil nor the inching-up of interest rates negatively impacted demand.
Change is urgent and now is the time. Airline efficiency gains must be matched throughout the value chain. And we must find new ways of doing business. Airlines are leading the way by Simplifying the Business. The 100% conversion to e-ticketing by the end of 2007 is a great example. But we now look to the oil industry to move faster at developing alternative fuels to further improve efficiency and environmental performance.—Giovanni Bisignani, IATA’s Director General and CEO