Aviation industry experts are cautious about how long the current high demand will last Photo: AFP/File
business

Price of air tickets set to keep climbing

20 Comments
By Tangi Quemener

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

For members of the International Air Transport Association, 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.

The aviation industry has just gone through two years where planes flew with rows of empty seats, even as they offered fares much lower than before the COVID-19 pandemic.

But with the sector still mired in the red despite movement restrictions being largely lifted, the bargain bonanza for passengers is very much over.

In the United States, the average price of an internal flight has shot up, from $202 in October 2021 to $336 in May this year, according to the Federal Reserve Bank of Saint Louis.

In the European Union, 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, according to aviation research specialists Cirium.

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 will account for 24 percent of their total costs this year, up five 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.

But Scott Kirby, chief executive of United Airlines, 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."

But Vik Krishnan, a partner at McKinsey & Co, is cautious about how long the current high demand will last.

"Some of the travel that we're seeing right now is a function of all the stimulus that governments" pumped into economies during the pandemic, boosting citizens' spare income, he said.

"The number one discretionary income spending is travel and that's what people are doing.

But "how long that lasts remains to be seen", he added.

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.

And 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 $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 currently 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 in 2021. It also wants price curbs.

But 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".

But 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 warned.

© 2022 AFP

©2022 GPlusMedia Inc.

20 Comments
Login to comment

Still a lot of cheap flights if you search for them.

4 ( +5 / -1 )

The days of international travel for low income people or people from the lower middle class all over the world is over.

Carbon usage will be monitored and a carbon tax will be next and there will be a quota on how much carbon you use without paying extra.

Food, travel, heating, cooling etc etc will be included.

For many, this will be a digital 'transaction denied' scenario as they try to buy their flights online and cannot.

Unless you are wealthy, you won't be traveling like you have grown to expect.

And you thought it would go back to normal after the pandemic. Lol. Don't say you weren't warned by many.

1 ( +6 / -5 )

There is a slight creep in prices but there are still many cheap tickets to be found

0 ( +2 / -2 )

Did the airlines buyback their stock with some of that bailout cash?

And you thought it would go back to normal after the pandemic. Lol. Don't say you weren't warned by many.

Ah yes. Welcome to the 21st century. Which is looking like, the first quarter anyway, is blame everything on Putin.

3 ( +3 / -0 )

I didn’t find that flights were that cheap during the pandemic and I flew multiple times in 2020-2021

5 ( +5 / -0 )

Interested in new Zipair flights from Narita to San Jose California. A cheap nonstop to the SF Bay Area

2 ( +2 / -0 )

The days of international travel for low income people or people from the lower middle class all over the world is over.

I suspect that is true. The KLM flights to Europe I used to take 10-15 years ago (110,000 yen return in May) now cost double or more. Which is bad if you are going alone, but ruinous if you are paying for a whole family. There are still deals on places LCCs go, but not many of them are long haul.

3 ( +4 / -1 )

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

When you read bull like this, you wonder if the author actually researched the price of oil and fuel at least one year before Russia’s military operation?

4 ( +6 / -2 )

I checked Sky Scanner and there were flights to Europe for ¥70,000. That was with a layover though... direct was 225,000

0 ( +0 / -0 )

OK I understand for fuel & some other costs that fare will be more than pre-covid BUT I am flying home today, lost dad last year, mom is getting old so I got to do this.

But the cost is about over DOUBLE what the same seat would have been pre-covid, so when I get back I wont be flying again until prices get to normal!

0 ( +0 / -0 )

Well, fuel prices in some places have doubled. When I was in the US last spring, I paid about $2.40 a gallon for gas. Now the average is about five bucks. Hell, gas in Canada now costs more than gas in Japan, and Canada HAS oceans of oil!

3 ( +3 / -0 )

Well, the hopes of so many people that depend on tourism about an spectacular bounce back as soon as restriction were lifted seem gone. Rich people will keep traveling as usual, but for most of the people the prices are steep enough to re-consider international travel.

-1 ( +0 / -1 )

In the United States, the average price of an internal flight has shot up, from $202 in October 2021 to $336 in May this year, according to the Federal Reserve Bank of Saint Louis.

As result of antirussian sanctions tickets for domestic flights in Russia went down by some 10-15% in most cases.A bit opposite direction than USA?

-1 ( +0 / -1 )

Flying will eventually become a privilege for the rich people only. They control everything. They don't want poor peasants roaming around their exclusive ski zones in Switzerland, or private villas in Cambodia.

1 ( +1 / -0 )

Japan and Asia are pretty good, thanks to their regulated markets, which can quickly return to pre-pandemic capacity . US and Canada, European passengers are really suffering, thanks to the local airlines’ massive layoffs and other forms of downsizing. 

We’re going to Thailand from Japan in August and got a pre-pandemic level fare.

0 ( +0 / -0 )

RodneyToday  10:36 am JST

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

When you read bull like this, you wonder if the author actually researched the price of oil and fuel at least one year before Russia’s military operation?

When I read the bull you post all day I wonder how you manage to even find your own socks in the morning, let alone put them on.

-1 ( +2 / -3 )

Thank the west for their sanctions pushing up oil prices but doing almost nothing or in fact nothing to hurt Russia.

-3 ( +1 / -4 )

Thank the west for their sanctions pushing up oil prices but doing almost nothing or in fact nothing to hurt Russia.

Nothing YET.

There you go. Now it's accurate. No serious person believes that the Russian economy is not in for a "correction" of epic proportions.

0 ( +1 / -1 )

To reduce carbon emissions, the industry focus is on sustainable aviation fuels (SAFs), which are currently two to four times more expensive than fossil-based aviation fuel . . . On Tuesday, the IATA urged governments to provide subsidies to ensure SAF production reaches 30 billion liters in 2030, up from 125 million liters in 2021. It also wants price curbs.

This, at a time that the price of jet fuel is not only rising, but since 1Q has been rising much faster than the price of oil futures, largly due too the cost of refining jet.

For perspective, the price of jet fuel, world average as of last week, in USD per barrel was 177.08. Up .3% from the previous week, up 20.8% MoM, and up a whopping 128.9% YoY.

The IATA's own figures show that the global airline industry’s fuel bill amounts to a average quarter of operating costs.

The pledge that the industry made towards the Paris Agreement requires substantial government subsidities, as there is no where near the refining capacity required to implement SAFs on any scale.

The pledge is an example of one made by a well-intention industry, knowing - even back when it was made, as especially now - that it was going to be paid by someone else. Without regard to the contributing impact on the entire travel and hospitality industries, and on global stagflation and recession.

0 ( +0 / -0 )

The upside is that airports (hopefully) will be less crowded than they once were-can that be a bad thing?

0 ( +0 / -0 )

Login to leave a comment

Facebook users

Use your Facebook account to login or register with JapanToday. By doing so, you will also receive an email inviting you to receive our news alerts.

Facebook Connect

Login with your JapanToday account

User registration

Articles, Offers & Useful Resources

A mix of what's trending on our other sites