Thu, Jun 23, 2022 page10

• Air tickets set to keep climbing from COVID-19 pandemic low: experts

  • AFP, DOHA
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  Propelled by inflation, the price of air tickets has begun to take off again after tumbling during the COVID-19 pandemic, a reversal that looks set to intensify due to environmental pressures, experts say.

  For members of the International Air Transport Association (IATA), gathered in Doha for their annual meeting this week, minds are focused on how far such increases risk undermining passenger growth targets.

  The IATA is also pleading for government support in reconciling the long-term commitment to net-zero carbon emissions with those ambitious targets.

  

  People walk inside Salt Lake City International Airport in Utah on June 2.

  Photo: AP

  In the US, the average price of an internal flight has shot up, from US$202 in October last year to US$336 last month, according to the Federal Reserve Bank of Saint Louis.

  In the EU, the price of a return ticket before tax in April returned to that seen in the same month of 2019, after a near 20 percent fall in 2020, aviation research specialists Cirium said.

  The oil price shock stoked by Russia’s invasion of Ukraine is the most obvious factor in these price rises.

  Airlines estimate that fuel prices would account for 24 percent of their total costs this year, up 5 percentage points from last year.

  Ticket prices are also being stoked by wider inflation — now at 40-year highs in developed markets — as well as stronger-than-expected demand for tickets and labor shortages.

  However, Scott Kirby, chief executive of United Airlines Holdings Inc, said despite the trend clearly rising, prices had yet to shoot beyond historical norms.

  “In real terms, pricing is back to 2014 levels ... and it’s lower than it was essentially every year before” then, he said. “So ... I don’t think we’re going to see demand destruction.”

  Beyond rising costs and fears that government stimulus will fade, airlines face commitments that sit very uneasily alongside each other.

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

  Yet over the same time horizon, they are beholden to achieving net-zero carbon emissions.

  The total cost of transitioning the sector to net-zero is estimated by the IATA at an eye-watering US$1.55 trillion.

  “Airlines don’t have the ability to absorb” the cost of that transition, IATA director-general Willie Walsh said this week.

  To reduce carbon emissions, the industry focus is on sustainable aviation fuels (SAFs), which are two to four times more expensive than fossil-based aviation fuel.

  Some governments have already imposed SAF quotas, albeit in small quantities, resulting in airlines in turn imposing surcharges.

  On Tuesday, the IATA urged governments to provide subsidies to ensure SAF production reaches 30 billion liters in 2030, up from 125 million liters last year. It also wants price curbs.

  However, even if such subsidies are forthcoming, “the transition to net-zero will have to be reflected in ticket prices,” Walsh said.

  Could that reverse the long-standing global trend of air travel progressively extending beyond the wealthy?

  Krishnan believes such “democratization” will become “harder.”

  However, he also said “low-cost airlines have unleashed a world where people living in northern Europe took it for granted that they could go on cheap vacations in southern Europe.”

  It would be “very hard for governments to unwind” such entrenched expectations, he said.
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