Aviation Executives Caution That The Cost Of Airline Tickets Could Increase Further

According to William Walsh, the director-general of the International Air Transport Association, the cost of airline tickets may increase due to a lack of refining capacity and the airlines’ financial situation (IATA).

According to Walsh, the airline industry is “concerned” about the pandemic’s impact on refining capacity and the rise in jet fuel prices brought on by the rise in fuel demand.

Since reaching its peak in 2019, U.S. refining capacity fell by 5.4 per cent in 2022, reaching its lowest level in eight years. The decline followed the conversion of refineries to produce more renewable fuels and refinery closures.

While consumers are paying more for tickets, Walsh continued, airlines are not always turning a profit.

“And given the financial state of many airlines … It’s not that airlines are making money, [they] are just passing on a cost that they can’t absorb themselves, and that they can’t avoid,” he said.

The cost of airline tickets has increased by 25 per cent in the last year, which is the largest annual increase since 1989. Airfares increased by 18.6 per cent in April alone, according to the Bureau of Labor Statistics.

But according to Qatar Airways CEO Akbar Al Baker, another factor—announcement Russia’s of a military mobilization—could result in even higher ticket prices.

As Moscow’s invasion of Ukraine continues, Russian President Vladimir Putin on Wednesday announced a partial military mobilization in Russia, putting its citizens and economy on a wartime footing.

According to Al Baker, the escalation of the Russia-Ukraine conflict is the airlines’ top concern, and China’s Covid policies are the “smallest of [his] worries.”

“For me, the biggest worry is the conflict spreading, which [will then] fuel inflation, putting more pressure on the supply chain,” he added. “The net result will be less passengers in my aeroplane.”

“It also worries me … the [instability] of the oil price, which I don’t want to pass to the passengers, which will then discourage them from travelling.”

Following Putin’s announcement, oil prices increased by more than 2 per cent due to worries about the Ukraine conflict escalating and reducing oil and gas supplies.

Al Baker insisted that Qatar will carry on operating flights to Russia as long as it is safe to do so.

“We will continue to fly to Russia, we will continue to serve the people … We are not a political institution. We are an industry that serves the common people.”

Al Baker urged increased spending on alternative fuels and stated that Qatar Airlines is “ready to invest in sustainable aviation fuel” under the condition that it is “reasonably priced.”

“I have no issue [paying] a bit more, but they cannot pay four or five times the price of a normal F-gas.” F-gas, also known as fluorinated gases are man-made gases applied in various industrial uses.

 “If we are pushed to do that, you as a passenger are going to pay for it,” he said.

Walsh reiterated his desire to see more money invested in sustainable aviation fuel production as opposed to conventional refineries, citing environmental concerns.

IATA set a target for the global aviation sector last year: net-zero carbon emissions by 2050.

“Sustainable aviation fuels do represent the best option that the industry has to achieve our target of net zero by 2050.”

(Adapted from CNBC.com)

Categories: Economy & Finance, Entrepreneurship, Geopolitics, Regulations & Legal, Strategy, Sustainability, Uncategorized

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