PREMIUM TRAFFIC GROWTH SLOWS, WHILE US GETS TOUGH ON OIL SPECULATORS

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By TESTCustomwebLP TESTCustomwebLP August 18, 2011 08:48

PREMIUM TRAFFIC GROWTH SLOWS, WHILE US GETS TOUGH ON OIL SPECULATORS

IATA Premium Traffic Monitor reports June premium traffic up 6.4% with economy traffic up 4.8% year-over-year. However, the aviation body warned that the level and growth rates have fallen back from levels seen in May due to slower world trade growth and weakening business confidence. In June, premium passengers represented 8% of international traffic but accounted for 27% of the world airline industry’s revenue.

With the economic situation worsening around the world, IATA predicts slower growth for the rest of 2011.

“The mixed picture across route areas remains,” IATA said. “Growth across the North Atlantic and on Europe-Far East markets continue in the low double digits so far this year, pointing to robust trade flows between those regions. However, routes across the Pacific, another key premium market, remain weak with growth of just over 3%, partly reflecting ongoing effects of events in Japan earlier this year.”

Once again, routes to Asia posted the strongest premium traffic growth in June, up 14.8%. North America-South America routes grew by 14.7%, while traffic on routes within Central America was down 56.6%.

Meanwhile, Delta is taking a stance against fuel speculators. The airline and the Air Transport Association have formed the Stop Oil Speculation Now coalition, which has been joined by 98 companies and trade groups. The group is pushing for curbs to be placed on speculators in the fuel markets on financiers that profit from the volatility in oil prices, which is made worse by heavy speculative trading.

John Heimlich, the Air Transport Association’s chief economist, says speculation: “warrants as much attention and scrutiny as the stock market gets, and deserves some checks on the power of any individual player so as not to unduly influence” pricing.

Delta hedges about 50% of its fuel costs through purchasing contracts for future oil delivery – locking in a future price. Airlines and trucking companies used to dominate the oil futures market and control some 70%, today however 70-80% of the market is dominated by pure speculators.

Delta and the Air Transport Association want to return to a market in which some speculation is encouraged but not to the point that it crowds out oil users. The Dodd-Frank Act, once the regulation is put into effect, will go some way to limit commodities speculation but it is unlikely to be to the extent the new coalition is pushing for.

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By TESTCustomwebLP TESTCustomwebLP August 18, 2011 08:48
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