International premium class traffic fell in March

Airline executives saw an ominous note in the latest worldwide traffic statistics compiled by the International Air Transport Association, a global trade association. IATA said that during March, first and business class passenger traffic on international routes declined by 3.9 percent from the same month in 2007. “Given the importance of premium passengers for airline profitability, the absolute decline in numbers is bad news, particularly since the price of jet fuel rose 170 percent over the year to March, reaching $130 a barrel,” IATA said. Industry watchers have been saying that it could be just a matter of time until ever-higher air fares lead to a drop-off in ticket sales. Not only have all air fares – both domestic and international – been through a series of increases in recent months, but international carriers have been boosting their fuel surcharges repeatedly. Since major U.S. airlines have been increasing their international routes as they shrink their domestic systems, a potential loss of revenue from premium-cabin overseas travelers could be a troubling development.

In other reports from Europe, the chief executive of British Airways last week predicted the airline industry is heading for more bankruptcies and consolidation, and the chief executive of Air France KLM warned that the industry will be “transformed” by skyrocketing fuel prices as carriers continue to reduce capacity. In the U.S., the Air Transport Association last week called on Congress to formulate a new national energy policy that provides “a more stable energy supply and predictable costs.” Noting that jet fuel prices have doubled in the past 12 months, and that U.S. airlines this year are expected to increase their fuel spending by $18 billion over 2007, ATA said energy supply and prices “have a profound impact, like never before, on the level and cost of air service.” ATA said 30 U.S. cities have lost all scheduled air service in the past year, and that more service cuts are “inevitable” due to rising fuel costs.