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Low jet fuel price signals warning for global economy

OAG’s 2015 Trends Report demonstrates that with the jet fuel price being down by 20% compared to a year earlier, the impact on the fuel bill for the global airline industry in 2014 would be a saving of US$7bn.

LUTON, UK – OAG is nnounced the key findings of its Trends Report “What is shaping air travel in 2015?”, following an analysis of global issues affecting the aviation sector.

John Grant, executive vice president, OAG, says: “While it is being reported that lower fuel prices are good news for airlines and their passengers, there is the possibility that these low prices reflect weaker demand in the global economy, in which case we could be at the top of the commercial aviation business cycle. We are entering 2015 on a positive note in terms of these fuel prices, but if economic activity should slow in the second part of the year, the portents would be outweighed by the short term optimism. If this is the case, 2015 is going to be a challenging year for aviation and the longer term implications on wider industries will soon be realised.”

OAG’s 2015 Trends Report demonstrates that with the jet fuel price being down by 20% compared to a year earlier, the impact on the fuel bill for the global airline industry in 2014 would be a saving of US$7bn. In its report, OAG has calculated the potential savings from a 5% reduction in the fuel price; carriers such as American Airlines and Emirates appear to make large gains in the current environment. For low-cost carriers (LCCs), the lower fuel price offers them an even greater cost advantage. According to OAG, however, the ‘shadow on the horizon’ is that if these lower oil prices do reflect weaker demand in the global economy, air travel demand is set to weaken.

In the report, OAG also analyses other key issues which will determine the decisions made by the world’s airlines in 2015 including the ‘Millennials’ generation and their influence on the aviation industry, the prized Chinese tourist, the African aviation market, the rise of Istanbul Airport, passenger growth and the economy, aviation reforms in India and prospects for Nigeria.

Millennials and their mobiles
Grant continues: “The Millennials generation, who will have progressed from education into the workplace, are to have a much greater influence on the aviation industry than previously realised. If we assume that people want to fly as much as they want to have mobile phone technology at their fingertips, we can see mobile phone use as a forward indicator of the future demand for air travel. We know that China and India will likely contribute 28% of the additional 4 billion air passengers between now and 2034.[i] Today, 29% of all mobile phone users live in China and India. Indonesia will account for 4.6% of the growth in air traffic to 2014; today, Indonesia accounts for 4.1% of global mobiles. Coincidence? Maybe, but we should expect the volume of air travel to more closely reflect the underlying population size in a market.”

The prized Chinese tourist
The combination of Malaysia Airlines’ two hull losses and the civil unrest in Thailand has prompted the much courted Chinese tourist to stay away from the Malaysia-Thailand-Singapore area[ii], with reports that visitor numbers were down by 30%.[iii] Zero growth in these markets comes at a time when total international passengers from China grew by 19% in September 2014, according to OAG Traffic Analyser. Since November 2013, 19 new Chinese airlines have commenced service or are in the planning stages. Even at 6% growth in passengers each year, the Chinese travel market would double every 12 years.

Ebola and the African aviation market
In the countries where Ebola has been concentrated, the outlook for 2015 is bleak, with January’s seat capacity to and from Sierra Leone down 75%, for Liberia down 81% and for Guinea down 39% vs January 2014. However, across Africa, there has been plenty of growth in 2014 and ten countries managed to grow their international capacity by more than 10%. In October 2014 it was anticipated[iv] that African air passenger numbers will grow at an average annual rate of 4.7%, faster than the global average of 4.1%. In 2015 we can expect continued growth to and from Africa and the China-Africa market will be the one to watch; in 2014 28 out of 59 African countries experienced growth from China in excess of 60% over the 12 months to September 2014. By 2034, eight of the ten fastest growing markets globally will be in Africa.

Tatiana Rokou

Tatiana is the news coordinator for TravelDailyNews Media Network (, and Her role includes monitoring the hundreds of news sources of TravelDailyNews Media Network and skimming the most important according to our strategy.

She holds a Bachelor's degree in Communication & Mass Media from Panteion University of Political & Social Studies of Athens and she has been editor and editor-in-chief in various economic magazines and newspapers.