PEOPLE ARE TAKING fewer low-cost flights on holiday, with passenger numbers falling by 3 to 4 per cent over the last five months, according to an airline industry group.

The International Air Transport Association said demand from “price-sensitive” leisure travellers had dropped  thanks to rising ticket costs forced up by high oil prices. Ryanair, led by Michael O’Leary, has warned that it will hike its prices by 12 per cent this year alone.

With oil at $110 a barrel, fuel now makes up 30 per cent of an airline’s costs. In 2001 it was just 13 per cent.

The group said airlines worldwide would see their profit margin fall to just 0.7 per cent this year – but the industry is still forecast to make a total profit of €2.7billion. The earthquake and nuclear disaster in Japan and political unrest thanks to the uprisings in Arab countries have all affected demand for air travel, according to the IATA, which also singled out government travel taxes as a factor.

Director general of the IATA Giovanni Bisignani said: “Natural disasters in Japan, unrest in the Middle East and North Africa, plus the sharp rise in oil prices have slashed industry profit expectations. That we are making any money at all in a year with this combination of unprecedented shocks is a result of a very fragile balance.”

However, demand for “premium” business travel has continued to grow. Sales are expected to rise by five to six per cent this year – less than the nine per cent growth seen in 2010, but enough to offset some of the industry’s troubles.