According to experts, ticket prices began to rise again after falling during a pandemic, boosted by inflation.
For members of the International Air Transport Association who gathered in Doha for this week’s annual meeting, attention is focused on the risk that such an increase could undermine passenger growth goals.
IATA also seeks government support to align its long-term commitment to net zero carbon emissions with these ambitious goals.
It’s been over two years since the plane flew in a row of vacant seats, even though the aviation industry offered fares much cheaper than before the Covid-19 pandemic.
However, despite the significant lifting of travel restrictions, the sector is still in the red and the bargain bonanza for passengers is very over.
According to the Federal Reserve Bank of St. Louis, the average price of domestic flights in the United States soared from $ 202 in October 2021 to $ 336 in May this year.
In the European Union, pre-tax return ticket prices in April fell by nearly 20% in 2020 and then returned to the prices seen in the same month of 2019, according to aviation research expert Cirium. rice field.
The oil price shock caused by Russia’s invasion of Ukraine is the most obvious factor in these price increases.
Airlines predict that fuel prices will account for 24% of total costs this year, up 5 percentage points from last year.
Ticket prices are also plagued by wider inflation (currently the highest in developed markets in 40 years) and unexpected demand and labor shortages for tickets.
But United Airlines CEO Scott Kirby said the trend is clearly rising, but prices haven’t exceeded historical standards yet.
“In essence, prices are back to 2014 levels … and it’s essentially lower than before every year,” he said.
“So … I don’t think we’ll see a disruption in demand.”
However, McKinsey & Company partner Vik Krishnan is cautious about how long the current high demand will continue.
“Some of the trips we’re seeing now are all the stimulus features the government has sent to the economy during the pandemic, pushing up citizens’ reserves,” he said.
“The biggest discretionary income and expenditure is travel, which is what people do.
But “I still don’t know how long it will last,” he added.
-Climate crisis and cheap holidays-
Beyond concerns about rising costs and diminishing government stimulus, airlines face commitments that are very disturbing 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, nevertheless, over the same period, they focus on achieving “net zero” carbon emissions.
The total cost of moving the sector to “net zero” is estimated by IATA to be $ 1.55 trillion.
“Airlines are not capable of absorbing the costs of the transition,” IATA Secretary William Walsh said this week.
To reduce carbon emissions, the industry is focusing on sustainable aviation fuels (SAFs). It is currently 2-4 times more expensive than fossil-based aviation fuel.
Some governments have already imposed SAF quotas, albeit in small quantities, and as a result, airlines are imposing additional charges.
On Tuesday, IATA urged the government to subsidize SAF production from 125 million liters in 2021 to 30 billion liters in 2030.
But even with such subsidies approaching, “the transition to Net Zero will have to be reflected in ticket prices,” Walsh said.
Can it reverse the long-standing global trend of air travel that gradually expands beyond the wealthy?
Krishnan believes that such “democratization” will be “more difficult”.
But he also said, “Low-cost carriers have unleashed a world where people in Northern Europe took it for granted that they could take cheap vacations in Southern Europe.”
He warned that such persistent expectations would be “very difficult for the government to unleash.”