Plane tickets are set to become more expensive as a result of rising crude oil prices and labour costs, warned head of the International Air Transport Association, IATA.
“The issue that will impact fares in the short to medium-term will be the high price of oil, that continues to remain stubbornly high … and increased charges by ANSPs and airports,” said Willie Walsh, the director general of IATA.
“Higher oil prices will reflect in ticket prices,” Mr Walsh said. “Where airlines have made huge losses in recent years, it’s impossible to absorb increases and will have to be passed on to consumers and will have to be reflected in the pricing, he said during an online media briefing monitored by Persecondnews.com
Mr Walsh said. The industry has no choice but to reflect this into plane ticket prices.”
Rising oil prices will add pressure on airlines’ costs, forcing them to pass on some of that burden to passengers by raising air fares, but will not stall the recovery of carriers, according to the head of the IATA.
Global airlines, already battered over the past 20 months by the Covid-19 pandemic that has hit their revenue, are facing stronger oil prices of about $80 per barrel and increasing fees from air navigation service providers (ANSPs) seeking to recoup their own losses.
Oil prices have hit multi-year highs with global supplies constrained while demand is rising as developed economies rebound faster than expected from the coronavirus-induced slowdown. Brent, the global benchmark under which two thirds oil trades, has gained more than 60 per cent since the start of the year and was trading at $82.87 a barrel at 3.30pm Nigerian time on Wednesday.
Fuel typically makes up 25 per cent of an airline’s cost. Global carriers will shoulder total accumulative losses of $201 billion in the period between 2020 to 2022, as a result of the pandemic that brought air travel to a halt, according to Iata’s latest industry report in October.
The higher pricing will reflect airlines’ cost of operations, rather than a supply-demand dynamic, Mr Walsh said.
The situation will affect plane tickets worldwide.