Financial markets "are signalling their belief in further improvements in the financial performance of airlines" following figures showing strong growth in international air travel so far this year, particularly in the premium classes, according to a report released yesterday.

The International Air Transport Association (Iata) financial monitor for February and March points out that the Bloomberg worldwide airlines equity price index was up by 7 percent in March, compared with February and has risen by 10 percent so far this year. It has risen by a total of 69 percent from its lowest level early last year.

"Europe is lagging with prices up 56 percent, but US airlines have performed best with a 122 percent rise in share prices above the low point early last year.

"A return to 2007 earnings is not expected as all airline indices remain between 40 percent and 50 percent below their peaks in late 2007.

"However, the stronger markets have enabled airlines to raise an extra $1 billion (R7.3bn) in equity, as well as a similar amount in debt this year," the report notes.

The survey shows, however, that oil prices - which soared to such an extent that they forced some airlines out of business before the recession caused passenger numbers to fall - are rising again.


They averaged just more than $75 a barrel in the first quarter, but futures markets expect them to reach $83 by year end. Aviation fuel prices averaged $86 a barrel in the first quarter and $89 by last month. "If the futures markets are right and crack spreads remain unchanged, spot prices will be above $94 a barrel by year-end," warned Iata.

It added that despite the encouraging upward trend in international travel, airlines are putting capacity back in the market at a cautious rate.

But a combination of new deliveries and bringing older aircraft out of storage means that the number of aircraft in service has continued to grow.

The rise in passenger numbers has made it possible for airlines, which cut fares when the recession was at its worst to encourage more people to travel, to raise them again.

Fares in both premium and economy classes now average about 10 percent more than their low points in the middle of last year, excluding fuel surcharges and taxes.

But Iata says that despite this, "fares are clearly lagging far behind" the improvement in demand.