Even though airlines have been constantly improving their operational performance and new aircraft models have become more fuel efficient, growing demand and rising cost for fuel and aircraft financing will inevitably result in climbing airfares for 2013.
Latin America is expected to see the highest jump in airfares with 6-7%, due to demand in this region will rise the most, according to Advito.
High expectations for strong long-term growth in Asia-Pacific will likely result in a price increase of 4-5%. The same increase will be seen in North America, where more and more travellers want to get airborne. From all regions, Europe is expected to see a price increase of only 2-3%, almost matching with the inflation rate.
The rise in global demand for air travel will play an important role in predicting future airfares. According to Boeing, world airline traffic is expected to grow from 5.20 billion passengers in 2011 to 13.76 billion 2031, representing a jump of 265% in the next 20 years.
Apart from the growing demand, rising fuel prices represent another major factor for the upwards trend in airfares. Since jet fuel constitutes the largest cost portion of most airlines, price increases and high fluctuation rates have the most severe impact on the overall performance of airlines.
This trend forces airlines to conduct a more aggressive fuel hedging and aim at an even better fuel economy. Some airlines might even consider vertical integration to reduce the exposure to highly volatile fuel prices. Delta Air Lines for instance has recently revealed plans to buy their own oil refinery near Philadelphia, USA.
Members with access to category reports can find the full report into air travel here.
Peter Lueckert is research analyst for Procurement Leaders.
