Global aviation riddled by economic misfortune

The latest word from International Air Transport Association (IATA) on the monthly traffic progress of the global aviation industry speaks volumes about the state of the industry. Where air travel worldwide is now aiming for a soft landing, thanks to dreary consumer and business confidence, the air freight markets continue to paint a gloomy future. Aviation industry is fragile, and it remained susceptible to the economic cycles during CY11. Even though the passengers demand was increasing during the year, and international and domestic air traffic grew by 5.9 percent compared to the historical range of 4 - 5 percent, the profitability of the industry dropped significantly by 50 percent YoY during CY11 primarily on account of fuel cost. Net margins grew by a tad; 1.3 percent on the back of an increase of almost 41 percent in average per barrel price of oil. Regionally, Latin American airlines witnessed the biggest YoY growth of around 11 percent while the African markets didn garner much during CY11. Growth in Asia Pacific region was moderate at 5 percent but waning in comparison to CY10. Individually, Chinese, Indian and Brazilian airlines expanded the most. On the other hand, the mature markets like United States hardly existed on the growth map. A varying trend that kept the fragile aviation industry afloat through the choppy recessionary waters of CY11 was the growth in first-class and business-class travel overtaking the economy-class, as highlighted IATAs Annual Review. This was true for the trans-Pacific and trans-Atlantic markets due to increased business travel. On a fragile avenue, global air transport continues to grapple with the eurozone debt dilemma and the rising fuel prices even today. With progressive bail outs and further deterioration in the euro region, restoration of consumer confidence is nowhere in sight. In such times, the greatest challenge for the airlines and the industry is their tussle with revenues and costs for margins. Further, the climate targets of IATA consist of increasing the fuel efficiency by 1.5 per annum up till CY20, capping net carbon emissions from CY20 and decreasing carbon emissions by 50 percent in CY50 from those of CY05. The commercial viability of this alternate fuel in the long run has its qualms which require cooperation amongst all stakeholders. Half of CY12 has gone by, and there has been no sign of abating of the eurozone debt crisis or the oil market drama. Where the global aviation has been a victim of exogenous factors and falling consumer demand, a stark reality for Pakistans aviation sector is its own structural injuries, beside the universal threats.