Increasing Demand For Commercial Passenger Flights Plus Less Expensive Jet Fuel Signals Prospects Of A Profitable Summer For Airlines

 @CareyDrew2
on May 03 2013 12:42 PM
  • Boeing 777-ER For Air France
    A Boeing 777 300-ER takes off from Everett, Wash., April 10, 2009, on its way to France. Reuters
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    The forces are lining up for airlines to have a strong summer ’13 as share prices for the industry as a whole have risen a solid 12 percent this year. Reuters
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Airline Industry The forces are lining up for airlines to have a strong summer as share prices for the industry as a whole have risen a solid 12 percent this year.  Reuters

Strong demand for commercial passenger travel and less expensive jet fuel are combining to augur a strong summer for airlines, especially for U.S. carriers.

The International Air Transport Association, or IATA, said Friday that passenger travel is increasing as business confidence grows.

In addition, jet fuel prices dropped more than $25 per barrel in April, compared to the most recent peak in February on expectations of growing non-OPEC sources of petroleum supplies and weakening demand. Jet fuel has not seen its current price level since mid-2012, when a United Nations embargo on Iran affected oil supply, IATA said.

Airline passenger yields, the measure of average fare paid per mile per passenger, improved in the last quarter of 2012 and has continued its positive trend into this year. The increase in yield over the past several months signals an upturn in traffic demand and higher load factors, which remain strong and close to 80 percent.

In response to heightened demand, passenger capacity expanded 0.3 percent in March from the previous month's level. Seat availability rose in March because of new aircraft deliveries, as well as aircrafts coming out of storage.

IATA said that initial Q1 financial results show operating profit improving in the U.S.

One measure of upbeat expectations in the industry has been increased aircraft production. European aircraft manufacturer Airbus recently announced that it boosted production of the A330, an older passenger jet that has prospered, thanks to previous delays in production of the Boeing (NYSE: BA) 787 Dreamliner, to a record level of 10 per month.

British Airways and Iberia parent IAG also recently expanded an order for Boeing 787s, while IAG reportedly placed an order for 18 Airbus A350s.

In related news, Boeing just came out the back end of a very dark tunnel as the FAA recently cleared the aircraft manufacturer’s 787 Dreamliner of a battery problem that had grounded all 50 planes worldwide. The Boeing 787 Dreamliner carried passengers earlier this week for the first time in more than three months after the entire Dreamliner fleet was grounded as a result of the meltdown of the batteries aboard two 787s in January.

Ethiopian Airlines was the first carrier to get its Boeing 787 Dreamliner airborne with paying passengers after a three-month ordeal.

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