Airfare prices are set to rise

(Doha) Affected by inflation, airline ticket prices have started to rise again after two years of the pandemic crisis, a trend that is likely to increase over the long term amid environmental and regulatory pressures.

Posted at 10:29 am

Media Agency France

For those attending the International Air Transport Association (Iata), meeting this week at the annual general meeting in Doha, Qatar, the question will arise as to whether this price increase will have any impact on the accessibility of this mode of transport and its ambitious goals Growth plans despite the climate crisis.

The airline world has just experienced two years of partially empty planes and relatively low fares compared to pre-COVID-19 levels.

But with most travel restrictions lifted, that period of bonanza for travelers is over. And the trend is clear, regardless of the goals and deadlines.

“No drop in demand”

In the United States, the average price of a domestic trip has skyrocketed in six months, from $202 in October 2021 to $336 in May 2022, according to statistics from the Saint Louis Branch of the Federal Reserve.

In the European Union, the average excluding tax price for a one-way trip in April returned to the same month’s level in 2019, after falling by more than 20% in 2020, according to data from specialist company Cirium. in studying the industry.

And in France, prices for flights leaving the territory for all types of travel increased by 19.4% in May compared to the same month of 2021, according to the General Directorate of Civil Aviation.

The causes of this surge are well known: demand recovered faster than expected, supply was still constrained by organizational difficulties and labor shortages, unprecedented inflation in 40 years, fueled in particular by an oil shock accentuated by Russia’s invasion of Ukraine became …

Airlines expect to spend 24% of their costs on fuel this year, compared to 19% in 2021. And as they need to rebuild cash depleted by the health crisis, they’re being forced to pass those increases on to customers to pass on.

However, “we don’t see any drop in demand, and I don’t think we will see one either,” assures the general manager of American giant United Airlines, Scott Kirby, putting the current increases into perspective: “Really, prices are at the level returned from 2014 and lower than before that date”.

End of democratization?

“The current travel that is taking place is the result of government stimulus plans that have become disposable income for individuals,” notes Vik Krishnan, partner at McKinsey and air specialist.

“The number one discretionary spend is travel, and that’s what people do. It remains to be seen how long it lasts,” he wonders.

Aside from those challenges, a sword of Damocles hangs over air transport: the need to stop contributing to global warming by 2050, as it has pledged, while also transporting 10 billion people a year, up from 4.5 billion in 2019.

For decarbonization, two-thirds of companies rely on sustainable aviation fuels (SAFs), which are currently two to four times more expensive than fossil kerosene. Some governments are beginning to mandate them in small amounts, which has already forced companies to levy surcharges.

On Tuesday, Iata pushed to subsidize SAF production to reach 30 billion liters available in 2030 versus 125 million in 2021, with an obsession to lower prices.

The total cost of moving to net-zero emissions? According to Iata, $1550 billion over 30 years. “Companies will not be able to cope with these cost increases […]the transition needs to be passed on to ticket prices, and that could slow some of the growth,” the organization’s chief executive, Willie Walsh, acknowledged on Tuesday.

What can reverse the longstanding trend towards democratization of the sector? For Mr. Krishnan, “democratization will be more difficult to achieve.” But “it will be very complicated for governments to take away most people’s access to air travel,” he warns.

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