DALLAS – The head of the International Air Transport Association (IATA) warns that an airfare hike is unavoidable due to rising fuel costs.
At the Irish Tourism Industry Confederation annual conference, IATA Director-General Willie Walsh stated that he does not see how airlines could bear the increased costs given their frail balance sheets, low profitability, or continued losses.
“Ultimately, this will find its way into increased fares,” the director told RTÉ news at the conference, where he reminded the attendees that fuel was the single biggest cost for an airline.
Walsh explained, “If you look over the past ten years for the industry, it averaged 27%. We’ve seen it before, as high as 35% back in 2008 when fuel prices were up near $150 a barrel. So I don’t see any way that airlines can absorb this huge increase in cost.”
Energy Needs and the Environment
When asked if the present energy crisis will hasten the use of sustainable aviation fuel, Mr. Walsh responded, “yes.”
The Director-General told the Irish news outlet that the energy crisis was creating an incentive because not only has the cost differential decreased, but he believed people recognized the benefit of having greater independence, of not having to rely on jet kerosene, since sustainable fuels could be produced everywhere.
As we reported on our Earth Day 2022 story, Walsh stated that much was being done to make air travel cleaner, and that airlines used every last drop of sustainable aviation fuel (SAF) available to them last year.
“It is not a case of airlines needing to be told or forcing them to use it,” says Walsh. “In fact, they want to use it, even at today’s price differential.”
Recovery in the Green
Walsh stated that he had always believed that if border restrictions were eliminated or relaxed, there would be a rebound in aviation. In fact, he acknowledged the recovery was stronger than most people thought it would be.
However, the Director-General cautioned that returning to 2019 levels of activity would be a significant challenge and depended on the region of the world where an airline operated. Walsh added that while the situation hadn’t discouraged people from flying, the bad news was that the industry had to restore the infrastructure that had been damaged as a result of the two years of significant lockdown.
Therefore, Walsh believes it is unfair to criticize airlines and airports for failing to accurately foresee the speed of recovery and, as a result, being unprepared for the amounts of demand in some situations.
Employee security checks, for example, when there have been delays, he said, are dependent on other authorities, as airlines do not perform these duties themselves. According to Walsh, the whole value chain was not correctly connected up in anticipation of a rebound.
Still, Walsh, a former chief executive of Aer Lingus (EI), British Airways (BA), and their parent company International Airlines Group (IAG), believes the aviation industry is on the mend, but added, “It is very tough to be an airline CEO at the moment, the challenges facing them are significant.”
Featured image: Boeing 737 MAX. Photo: Michal Mendyk/Airways