Air fares are headed higher due to higher fuel costs and a reduction of business travel
The cost of airline tickets is on the increase, according to the International Air Transport Association. IATA said the price hikes will affect both national and international flights, worldwide.
“There are two major factors driving air travel costs higher in all markets,” says Willie Walsh, president of Geveva, Switzerland-based IATA. “First, fuel prices have increased by almost 40 percent since the beginning of year and projections are that they will continue to rise, at least in the short term. Fuel accounts for about 25 percent of airline costs.
“The second reason for higher ticket prices is that business travel has not recovered from the pandemic and is still down by more than half of the pre-pandemic rate and airlines want to recover some of the loss with higher prices on other tickets, including those for personal travel. Business travelers typically pay higher rates than leisure travelers.”
According to Walsh, there are other reasons travel costs are headed higher, including the higher fees and surcharges being charged by airports. “Most airports are public operations and they face big budget shortfalls due to the reduction in the number of flights. Flights are increasing as the pandemic recedes but most airports still report a net loss of about 30 percent of the flights they handled in 2019.”
Walsh added that due to “structural changes” airlines are making, particularly in scheduling, it may take years to return to the number of flights in the air before Covid-19.
Still another factor sending ticket prices higher, Walsh says, are the losses airlines suffered during the pandemic. Airlines in North America and Europe received subsidies or low-interest loans to cover some of their losses, he says, but most of the world’s airlines did not receive government help. “Almost a third of the world’s airlines have sought protection from creditors as a result of losses, many through bankruptcy proceedings,” he says.
Worldwide, Walsh says air travel is only 60 percent of the 2019 level. “The market is recovering, but slowly, with ticket sales increasing in all countries except Russia, China and Japan,” he says.