Business Traveller

Triple-digit oil and business travel


A lot has happened since March 2, when IATA director-general Giovanni Bisignani, commenting on global airlines’ oil-hit net profit margins, referred to the estimated 1.4 percent 2011 figure as more worthy of a charity than an industry. Even that measly increment, Bisignani added on March 29, is “under considerable pressure.”

As we reported on the 2nd, IATA’s forecasts assume an average oil price of $96 per barrel for Brent crude this year. Every $1 increase in the price of a barrel, said Bisignani, adds $1.6 billion in costs to airlines, which are estimated to have hedged 50 percent of their fuel purchases this year.

Even up to a fortnight hence, the industry was all set up for a great year; IATA informed us on March 16 that “rising business confidence points to further gains in the months ahead.” But thanks to developing North African unrest, Brent crude has risen by 20 percent this year; a barrel for April delivery now goes for approx. $110.

The Middle-East uprising and the Japan crisis has also of course reduced bums on seats: February’s international traffic is down by about 1 percent, IATA said today (March 29), with would-be travellers delaying or postponing their journeys to affected areas.