"Shanghai air fares are at their lowest levels for five years." This
quote from a well-placed source is surprising for two reasons. Firstly,
oil price rises are sending global airlines into meltdown. Cathay
Pacific is the latest to issue a profits warning, and Chinese airlines
are among those to have announced new fuel surcharges in their pricing
mechanisms. Carriers worldwide are very aware that passing on increased
fuel prices to passengers will simply slash demand, but have very
little leeway as operating costs are pushing many of them close to the
brink. The current result is airlines are slashing long-haul flights
and offering cut-price deals on routes (especially from China) that
they believe will be profitable in the longer term.
The second surprise factor is that projections earlier this year
suggested the Beijing Olympics would galvanise China's travel and
tourism industry – notably increasing the demand for, and, therefore,
the pricing of, hotel rooms and air tickets. It simply hasn't happened.
International travel demand to China is weakening, and not just because
of the new visa restrictions. A frail U.S. dollar has decimated
America's outbound travel industry this summer, and economic loom in
Europe is also affecting long-haul travel. China is currently feeling
the pinch of cyclical global economics, and not thesuperficial Olympic tourism boost that was so widely predicted.
As Giovanni Bisignani, IATA's Director General and CEO, said this week,
"The high price of oil is re-shaping the industry. The major shifts in
[air] traffic flows experienced during May reflect this." His comments
followed new figures showing that international air cargo and passenger
travel demand in May were significantly down year onyear.
The air cargo dip is a genuine concern for manufacturing-focused
economies, like China. "Air cargo demand is considerably down from the
4.3 per cent recorded for the full year 2007," IATA says. "The biggest
cause of the slow growth came from a 0.5 per cent contraction in Asian
carrier traffic. This resulted from the impact of the earthquake in
China and weakness in the Japanese economy."
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