Airline passenger traffic for January showed an 8.2 per cent increase compared to January 2010 but the rise in oil prices is expected to make 2011 a very challenging year for the industry, said the International Air Transport Association (IATA).

The air freight traffic  showed 9.1 per cent growth in January, it said.

“We begin the year with some good news. January traffic volumes are up - 8.2 per cent on January 2010 and 2.6 per cent on December. With most major indices pointing to strengthening world trade and economic growth, this is positive for the industry’s prospects,' said Giovanni Bisignani, Iata's director general and CEO.

'But we are all watching closely as events unfold in the Middle East. The region’s instability has sent oil prices skyrocketing. Our current forecast is based on an average annual oil price of $84 per barrel (Brent). Today the price is over $100. For each dollar it increases, the industry is challenged to recover $1.6 billion in additional costs. With $598 billion in revenues, $9.1 billion in profits and a profit margin of just 1.5 per cent, even with good news on traffic 2011 is starting out as a very challenging year for airlines,” he said.

By January 2011, air travel volumes were 18 per cent higher compared to the low point reached in early 2009 and some 6 per cent above the pre-recession peak of early 2008. Air freight in January was 39 per cent above the low point reached at the end of 2009 and some 6 per cent above the pre-recession peak of early 2008. Freight has, however, fallen 2 per cent since its May 2010 peak at the height of the re-stocking bubble.

Passenger load factors were high, but there is evidence that supply growth is beginning to run ahead of demand, Iata said.

Compared to the previous January, the 8.2 per cent demand increase was outstripped by a 9.1 per cent increase in capacity, resulting in an average load factor of 75.7 per cent. Adjusting for seasonality this is equates to a 77.7 per cent load factor. This is a 1.1 percentage point drop from the October 2010 peak.

Middle East carriers saw demand grow 11.7 per cent in January compared to January 2010. The post recession recovery has been the strongest – some 45 per cent higher compared to the low point in September 2008.

The region’s economy looks positive with a predicted 4.2 per cent GDP growth which is likely to sustain growth in the air traffic market.

Political instability in parts of the region is expected to dampen demand in the affected areas. Egypt, Libya and Tunisia combined comprise around a fifth of the region’s international passenger traffic, Iata said.

Air freight volumes expanded at a robust 9.1 per cent in January after a revised 7.3 per cent in December and 6.9 per cent in November. Freight load factor stood at 49.2 per cent. All regions reported levels relatively unchanged from a year ago.  - TradeArabia News Service