Travel agents should brace themselves for passenger resistance to increases in airfares this year as airlines try to increase their profit margins.
Iata’s latest figures show an increase in global passenger demand, suggesting that the improved economic situation could see the travel industry, in particular air travel, recovering this year. Iata director general and CEO, Tony Tyler, forecasts that passenger demand in 2013 is expected to grow by 4,5% but that yields are expected to deteriorate by 0,2%, largely in response to lower fuel costs. 
“The increase in passenger demand reflects a general improvement in business confidence trends worldwide,” says Chris Zweigenthal, Aasa CE. Garth Wolff, CEO of eTravel agrees: “We are on the brink of an economic recovery, which will lead to more projects and hence more travel requirements.”
An increase in passenger demand, however, is often followed by an increase in fares. Wolff says: “I anticipate big fare increases this year as the airlines are making losses. The only thing that will prevent these increases is if we see the oil price drop significantly.” He adds that the major challenges facing airlines this year include the oil price and implementing fare increases substantial enough to make profits. 

Jonathan Gerber, CEO of TAG Travel, says: “I personally think that air travel is under-priced in many respects and has not kept pace with the cost of running an airline.” 
According to Zweigenthal, airline yields are under pressure as is profitability and if airlines are expected to cover operating costs, which will not decline, then their yields must rise. “This could lead to an overall average increase in fares but the competitive environment at the lower end of the fare scale will continue,” he says. 
Zweigenthal  highlights that the growth in passengers to which the industry has been accustomed (5% to 10% and above) will not occur. “Airlines will compete for market share, putting increasing pressure on operating margins.” 
Iata forecasts that oil prices are expected to moderate slightly to $104 per barrel (down $5,5 per barrel from 2012), while the premium paid for jet fuel refining is expected to see a smaller drop in jet fuel prices to $124,3 per barrel (down from $5,2 from 2012).
Tyler says: “Nett profits are expected to rise to $8,4billion (R74bn)  leaving the industry with a 1,3% nett profit margin. It is good that we are moving in the right direction but the year ahead is shaping up to be another tough one for the industry.”