Airlines reject criticism over high fares despite drop in oil prices

Tuesday, 16 February 2016 00:01 - - {{hitsCtrl.values.hits}}

Reuters: Global airlines countered allegations of profiteering from low oil prices on Monday after renewed criticism that air fares have failed to come down in line with tumbling fuel costs.

The head of the International Air Transport Association (IATA) told an audience of airline chiefs and regulators in Singapore that industry profitability remained fragile despite a record $36 billion in airline industry profits forecast for 2016.

“Certainly lower oil prices have helped, but that impact has been delayed and diluted in many parts of the world due to forward hedges at higher than market rates, as well as the rise of the US dollar against local currencies,” IATA Director General Tony Tyler said on the eve of the Singapore Airshow.

Politicians and consumer groups in the US and Europe have called on airlines to cut air fares as Brent oil prices tumbled from $114 in mid-2014 to around $30 today.

A year ago, as Brent hovered around $53 a barrel, UK Finance Minister George Osborne tweeted: “Vital this is passed on to families at petrol pumps, through utility bills and air fares”.

On Sunday, Graham Stringer, a member of the UK parliament’s transport panel, told Britain’s Sunday Telegraph airlines were exploiting passengers by failing to pass on lower fuel costs.

“It is nonsense...It is simply not the case that anyone is profiteering,” Tyler told Reuters, asked about the report.

“While fuel is still a big element of airline costs, there is still a huge chunk that is not affected, so to expect fares to tumble just because fuel has come down is wholly unrealistic,” he said.

“Look at the market in the UK and the number of airlines all competing. As costs come down so will fares, and the public is getting an extremely good deal from the industry right now.”

Airlines argue they are only starting to develop a sustainable profit for their investors due to high capital costs, regulatory constraints and intense competition.

But the industry is facing mounting consumer and political pressure as some airlines seem slow to unwind fuel surcharges.

The majority of this year’s industry profits, or $19.2 billion, will be generated in North America, IATA says.

Tyler reiterated a warning over the profitability of carriers in Southeast Asia, home to cut-throat competition between low-cost carriers. While fuel has fallen, the dollar has risen by 20 per cent against regional currencies in the last 18 months, he told a pre-air show conference.

Global aviation had fewer fatal accidents in ‘extraordinarily safe’ 2015: IATA

Reuters: The number of air accidents and resulting fatalities dropped in 2015 from the previous year, and was well below the five-year average, the International Air Transport Association (IATA) said on Monday, making 2015 ‘an extraordinarily safe year’.

Some 68 accidents occurred last year, compared with 77 in 2014 and an annual average of 90 over the last five years, according to IATA’s latest annual report on aviation safety. Of 2015’s accidents, four were fatal, versus 12 a year earlier.

“In terms of the number of fatal accidents, it was an extraordinarily safe year,” IATA Director General and Chief Executive Officer Tony Tyler said in a statement released on the eve of this week’s Singapore Airshow, Asia’s biggest aviation trade fair.

The accidents covered by the report killed 136 people, down from 641 in 2014 and a five-year average of 504, according to IATA, which represents some 260 airlines or 83% of the world’s total air traffic.

If the losses of aircraft in incidents involving planes operated by German low-cost carrier Germanwings, a unit of Deutsche Lufthansa AG, and Russia’s Metrojet last year are included, the total number of deaths rose to 510, according to IATA.

But the Germanwings and Metrojet incidents were excluded from IATA’s accident statistics, as they were classified as deliberate acts of unlawful interference. A pilot of the Germanwings aircraft deliberately crashed that plane in the French Alps, while the Metrojet flight was suspected to have been brought down over the Sinai Peninsula by a bomb smuggled on board.

“While there are no easy solutions to the mental health and security issues that were exposed in these tragedies, aviation continues to work to minimise the risk that such events will happen again,” said Tyler.

IATA said the 2015 global jet accident rate, measured in hull losses per 1 million flights, was 0.32, compared with 0.27 in 2014 and 0.46 in the previous five years.