Airline Industry Sees Long-Term Rebound for Sector

The International Air Transport Association (IATA) logo is seen at the International Tourism Trade Fair ITB in Berlin, Germany, March 7, 2018. REUTERS/Fabrizio Bensch
The International Air Transport Association (IATA) logo is seen at the International Tourism Trade Fair ITB in Berlin, Germany, March 7, 2018. REUTERS/Fabrizio Bensch
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Airline Industry Sees Long-Term Rebound for Sector

The International Air Transport Association (IATA) logo is seen at the International Tourism Trade Fair ITB in Berlin, Germany, March 7, 2018. REUTERS/Fabrizio Bensch
The International Air Transport Association (IATA) logo is seen at the International Tourism Trade Fair ITB in Berlin, Germany, March 7, 2018. REUTERS/Fabrizio Bensch

After flying into the financial turbulence of the Covid pandemic, the airline sector expects passenger traffic to take off despite concerns about the industry's impact on climate change.

In its latest look at trends for the sector, the International Air Transport Association (IATA) said it doesn't expect world air traffic to resume to its pre-pandemic level before 2023.

But over 20 years, air traffic should almost double, from 4.5 billion passengers in 2019 to 8.5 billion in 2039.

That is, however, a drop of one billion passengers from IATA's pre-crisis forecast.

Nevertheless, that will be good news for aircraft manufacturers, who slowed down production during the crisis as airlines cancelled orders to stay financially afloat.

Airbus has already announced it plans to step up the manufacturing cadence of its best-selling A320 single-aisle aircraft and should reach a record level already in 2023.

Boeing, for its part, forecasts that airlines will need 43,110 new aircraft through 2039, which will result in a near doubling of the global fleet. Asia alone will account for 40 percent of that demand.

As with the September 11 attacks or the global financial crisis of 2007-2009, "the industry will prove resilient again," Darren Hulst, vice president of marketing at Boeing, said last year.

Marc Ivaldi, research director at the Paris-based School for Advanced Studies in the Social Sciences, noted that only one percent of the population currently uses air travel.

"With the simple demographic rise and the fact that people become richer there will be rising demand for air travel and thus for aircraft," he told AFP.

If the biggest aircraft fleets are currently in the United States and Europe, the biggest increases are expected in Asia and the Middle East, the consulting firm Oliver Wyman said in a recent study.

Airbus delivered 19 percent of its planes to China, more than the United States, and this trend is not expected to change.

In many emerging countries where the middle class is expanding air travel is becoming possible for more and more people.

"Among Asia's emerging nations, one of the greatest aspirational goals is simply the ability to fly internationally," said the Center for Aviation (CAPA).

"It is a sign of social and economic maturity and permits experiences which were unthinkable for their parents."

It noted that these people were unlikely to share the growing sentiment among some people in the West towards reducing air travel to reduce one's carbon footprint.

"For these new would-be flyers, the whole concept of 'flight shaming' at a grass roots level is grossly alien," said CAPA.

"Consequently, in Asia flight shaming is unlikely to gain much traction," it added.

The "flight shaming" or "flygskam" movement took off in Sweden in 2018 to challenge the growing popularity of air travel, which had boomed in Europe thanks to budget airlines that made weekend getaways across the continent affordable to a wider public.

In 2019, air traffic declined by four percent in Sweden -- but it hit a record across Europe, according to the air traffic control body Eurocontrol.

EHESS's Ivaldi believes flight shaming will have little long-term impact.

"Someone who makes one flight per year in a plane, do you really believe that they will say that it is too polluting and give it up?" he said.

But countries like Sweden have begun to reintroduce night trains to give travelers greener options to travel.

France, which is boosting its night trains, is also cutting domestic flights when it is possible to make the journey by train in under two and a half hours.

Ivaldi believes that to be a largely empty gesture as fast trains have already taken most of the market on such routes.

The air sector has pledged to cut its carbon emissions in half by 2050 from their level in 2005.

Airlines have an economic incentive to do so, as adopting more fuel efficient planes reduces operating costs.



Oil Wavers as Trump's Colombia Sanctions Threat Rattles Markets

Pump Jacks are seen at sunrise near Bakersfield, California October 14, 2014. REUTERS/Lucy Nicholson
Pump Jacks are seen at sunrise near Bakersfield, California October 14, 2014. REUTERS/Lucy Nicholson
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Oil Wavers as Trump's Colombia Sanctions Threat Rattles Markets

Pump Jacks are seen at sunrise near Bakersfield, California October 14, 2014. REUTERS/Lucy Nicholson
Pump Jacks are seen at sunrise near Bakersfield, California October 14, 2014. REUTERS/Lucy Nicholson

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Oil market momentum was kept in check on Monday as prices fluctuated in and out of negative territory, with traders on edge despite the US pulling back from initial sanctions threats against Colombia, reducing immediate concern over oil supply disruptions.

Brent crude futures fell 36 cents, or 0.5%, to $78.14 a barrel by 1200 GMT. US West Texas Intermediate crude was at $74.27, down 39 cents, or 0.5%.

Both benchmarks oscillated between moderate gains and losses in early trading.

The US swiftly reversed plans to impose sanctions and tariffs on Colombia after the South American nation agreed to accept deported migrants from the United States, the White House said late on Sunday, Reuters reported.

Colombia last year sent about 41% of its seaborne crude exports to the US, data from analytics firm Kpler shows.

"Even if the sanctions didn't take place, this still creates nervousness that Trump will bully whoever needs to be bullied to get his way," said Bjarne Schieldrop, chief commodities analyst at SEB.

"Fundamentally, the market is surprisingly tight," said Schieldrop, referring to time spreads showing that the price of crude oil for quicker delivery is rising.

Gains were limited by Trump's repeated call on Friday for the Organization of the Petroleum Exporting Countries (OPEC) to cut oil prices to hurt oil-rich Russia's finances and help to end to the war in Ukraine.

"One way to stop it quickly is for OPEC to stop making so much money and drop the price of oil ... That war will stop right away," Trump said.

Trump has also threatened to hit Russia "and other participating countries" with taxes, tariffs and sanctions if a deal to end the war in Ukraine is not struck soon.

Russian President Vladimir Putin said on Friday that he and Trump should meet to talk about the Ukraine war and energy prices.

"They are positioning for negotiations," said John Driscoll at Singapore-based consultancy JTD Energy, adding that this creates volatility in oil markets.

He added that oil markets are probably skewed a little bit to the downside, with Trump looking to boost US output and try to secure overseas markets for US crude.

"He's going to want to muscle into some of the OPEC market share; so in that sense he's kind of a competitor," Driscoll said.

However, OPEC and its allies including Russia have yet to react to Trump's call, with OPEC+ delegates pointing to a plan already in place to start raising oil output from April.

Both oil benchmarks registered their first weekly decline in five weeks on easing concern last week over potential supply disruptions resulting from the latest sanctions on Russia.

Goldman Sachs analysts said they do not expect a big hit to Russian production because higher freight rates have encouraged non-sanctioned ships to move Russian oil while the deepening discount on the affected Russian ESPO grade attracts price-sensitive buyers.

Still, JP Morgan analysts said some risk premium is justified given that nearly 20% of the global Aframax fleet currently faces sanctions.

"The application of sanctions on the Russian energy sector as leverage in future negotiations could go either way, indicating that a zero risk premium is not appropriate," they added in a note.

Elsewhere, Chinese manufacturing data on Monday was weaker than expected, adding fresh concerns over energy demand.