Air tickets will continue to rise from the pandemic low: experts

A Japanese All Nippon Airways (ANA) passenger plane takes off from Tokyo’s Haneda Airport on April 28, 2022. (Photo by Kazuhiro NOGI/AFP)

Tangi Kemener
Agence France Presse

Due to inflation, airfare prices have started to rise again after falling during the pandemic, experts say, and this reversal looks likely to increase due to environmental pressure.

Members of the International Air Transport Association, gathered in Doha for their annual meeting this week, are focused on how such an increase could undermine passenger growth targets.

IATA is also pleading with governments for support in aligning a long-term commitment to achieving zero carbon emissions with these ambitious targets.

The airline industry has just gone through two years of planes flying with empty rows of seats, even though they were offering much lower fares than before the Covid-19 pandemic.

But with the sector still bogged down in the red despite travel restrictions being largely lifted, the bargain for passengers is all but over.

In the United States, the average price of a domestic flight has skyrocketed from $202 in October 2021 to $336 this May, according to the Federal Reserve Bank of St. Louis.

In the European Union, the pre-tax return ticket price in April returned to the price of the same month in 2019 after a nearly 20 percent drop in 2020, according to aviation research specialists Cirium.

The oil price shock caused by Russia’s invasion of Ukraine is the most obvious factor behind this rise in prices.

Airlines estimate that fuel prices will account for 24 percent of their total spending this year, up five percentage points from last year.

Ticket prices are also being spurred on by broader inflation – now at a 40-year high in developed markets – as well as stronger-than-expected ticket demand and labor shortages.

– Reality test –
But Scott Kirby, chief executive of United Airlines, said that despite the apparent upward trend, prices have not yet exceeded historical norms.

“In real terms, prices are back to 2014 levels … and they are lower than they were almost every year before,” he said at the time.

“So… I don’t think we’re going to see demand collapse.”

But Vic Krishnan, partner at McKinsey & Co, is cautious about how long the current high demand will last.

“Some of the travel we’re seeing right now is a function of all the stimulus that governments have been pumping into the economy during the pandemic, boosting citizens’ free incomes,” he said.

A Qatar Airways Airbus A350 aircraft at Los Angeles International Airport (LAX) in Los Angeles, California on June 19, 2022. (Photo by Daniel SLIM/AFP) kets

“For discretionary income-generating spending, the number one thing is travel, and that’s what people do.

But “how long this will last remains to be seen,” he added.

– Climate crisis vs cheap holidays –

On top of rising costs and fears that government stimulus will disappear, airlines are facing obligations that sit very awkwardly next to each other.

On the one hand, they aim to carry a total of 10 billion passengers by 2050, up from 4.5 billion in 2019.

And yet, in the same time horizon, they are bound to achieve “net net zero” carbon emissions.

The total cost of moving the sector to net zero is estimated by IATA at an incredible $1.55 trillion.

“The airlines are unable to cover” the cost of this transition, IATA CEO Willie Walsh said this week.

To reduce carbon emissions, the industry’s main focus is on sustainable aviation fuel (SAF), which is currently two to four times more expensive than fossil fuel-based aviation fuel.

Some governments have already introduced SAF quotas, albeit in small amounts, causing airlines to impose additional charges in turn.

On Tuesday, IATA urged governments to provide subsidies to ensure SAF production reaches 30 billion liters in 2030, up from 125 million liters in 2021. She also wants to lower prices.

But even if such subsidies are provided, “the transition to zero balance will have to be reflected in ticket prices,” Walsh said.

Could this reverse the long-standing global trend of air travel gradually moving beyond the rich?

Krishnan believes that such “democratization” will become “tougher”.

But he also said that “low cost airlines have opened up a world where people living in Northern Europe take it for granted that they can vacation cheaply in Southern Europe.”

He warned that it would be “very difficult” for governments to dispel such ingrained expectations.

© Agence France-Presse