Worldwide air travel records growth

Dennis Morrison, Contributor

Morrison

The most up-to-date figures for air travel worldwide indicate surprising resilience in international passenger traffic for the first four months of 2008. This traffic grew by 6.2 per cent, even while forecasters were painting a negative outlook as oil prices were increasing at an accelerated pace. Evidently, the demand for travel remained steady over the period, although economic conditions in the major countries had already begun to soften.

Domestic air travel did not, however, fare as well, with the level of domestic passengers remaining virtually unchanged compared with the similar period of 2007. Indeed, domestic passengers declined by 1.3 per cent in the biggest market. North America, where air fares have been rising and new baggage fees have been imposed to help offset higher oil prices.

At the current level of oil prices and given pressures on airfares, as well as recessionary economic conditions, we are likely to see a further slowdown in both international and domestic air travel in the coming months. In anticipation of such an outcome, United States carriers are already planning reductions in their schedules.

For now, these cuts appear to be aimed at removing excess seat capacity in the traditional slow Fall period and hence, should not affect summer travel which has become increasingly important to the local tourist industry. The major concern is therefore whether economic conditions and oil prices will be more favourable for the winter season.

us in recession

Essential to any positive turn in the outlook will be how soon the US economy begins to recover from the mortgage and credit crisis and its ripple effects on employment and consumer confidence. It is notable that despite some of the worst conditions seen in the housing market for several decades and a sharp drop in construction and manufacturing activity, the US economy has so far not slipped into a recession. But high oil prices and increasing inflation pressures still pose significant threats.

After apparently resisting appeals from the US and other major developed countries to boost oil production, Saudi Arabia and other members of OPEC are now signalling their willingness to increase output to help moderate oil prices.

The removal of subsidies on oil products in China, India and several other Asian countries should also serve to dampen the rate of growth of consumption and, therefore, ease oil price pressures. High prices are already restraining oil demand in the US and Europe.

The timeframe within which a turnaround in the US economy will take place is not obvious and most experts do not anticipate significant shifts before 2009. Fortunately, conditions in Canada remain positive and, therefore, that market provides scope for continued growth in visitor arrivals, especially as new hotel rooms on the island are scheduled to be opened for the next winter tourist season.

Dennis Morrison is a former chairman of the Jamaica Tourist Board.