CITI: Despite 8% Jump In Traffic, Airlines Are Going To Be Slammed This Year

plane aeroplane

Photo: AF.Mil

The International Air Transport Association reported an 8.2% jump in international scheduled traffic for January and a 9% rise in freight volumes but Citi analysts fear airline profits will be hit hard by crude oil.Crude oil prices could add more than $25 billion to annual costs for the airlines industry.

Right now airlines including Southwest, Delta and U.S. Airways appear to be managing rising fuel prices by implementing fare hikes. Citi fears though that airlines will not be able to sustain themselves with just rate increases if oil rises above $140.

Last week the NYSE Arca Airline Index hit its biggest one-day drop in nine months due to the oil price surge caused by worry over Libyan turmoil.

According to the Airline Transport Association, every penny-per-gallon-per-year increase in the price of jet fuel equals $170 million to $180 million in additional fuel costs.

“Leisure travel also is on the rise at a solid pace, but escalating fuel prices could start to pressure leisure demand as roughly two thirds of leisure travel is booked between the 2nd week in January and mid-April,” a Citi analyst wrote in a research note this morning.

Here are is Mary Meeker’s guide to the public debt crisis >

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at