Passengers will have to get used to more expensive tickets, says IATA

The price of oil is very high, and there is not much that airlines can do about it – after all, fuel is the biggest cost for companies in this market. The consequence is in the price of travel: passengers will have to get used to more expensive air tickets, according to Willie Walsh, director general of the International Air Transport Association (IATA). The organization is holding its annual meeting this week in Qatar.

“People will have to get used to (more expensive tickets). I’m not an airline CEO anymore, but I look at the fundamentals,” Walsh said. “The price of oil is very high, and it is the biggest cost of an airline. Companies can do little about it. They can do a hedge (protection), a short-term adjustment. But in the long term, everyone you have to pay the price of oil, which has structurally shifted to a higher level. And there is no way for airlines to absorb that.”

barrel high

The value of oil remains high on the international market. On Monday, the price of Brent oil closed the day at US$ 114.13 a barrel. Banks and brokers consulted by the Estadão last week they believe that the price of oil could rise from US$ 130 a barrel in the medium term and reach US$ 150 by the end of the year, as Morgan Stanley predicted in a recently released report.

“I don’t know what the price of oil will be, but everything suggests, when you look at the curve, that even if it declines a little, it will still be higher than we expected two years ago, when the spot price of a barrel was $50 or so. $60,” Walsh said. “Now we have a curve at $110, starting to pull back, but at a much higher level.”

The rise in oil also impacts aviation fuel - Press Release - Press Release

The rise in oil also impacts aviation fuel

Image: Disclosure

Walsh uses pre-pandemic industry data to show the size of the impact of rising oil. “The average price of a barrel between 2010 and 2019 was US$ 80. At that time, oil represented, on average, 27% of the industry’s costs. This was the best decade in the history of the industry, when our margin was 5.5 %. Then you see that it is not a very profitable industry. So the average price increases by 30% and goes from US$ 80 to US$ 105. The math is simple, ticket prices need to go up.”

response to criticism

The IATA director disagrees with the criticism of airlines and calls them “unfair”. “I don’t think it’s difficult for people to understand. An airline that is losing money cannot be accused of speculation when it is raising its prices because costs have increased significantly. They are still losing money.”

A survey by IATA released on Monday (20) shows that losses in the air sector this year should be US$ 9.7 billion (R$ 50 billion), still due to the covid-19 pandemic. The entity estimates that 2023 should finally be the year in which the sector as a whole returns to profit.

Woman with plane tickets at airport during pandemic - Getty Images/iStockphoto - Getty Images/iStockphoto

Walsh assesses that criticism of airlines at the time of post-pandemic resumption is “unfair”

Image: Getty Images/iStockphoto

Among the reasons for the relative optimism in the sector are the strong resumption of demand that has been verified and the efficiency gains of companies, even with the jump in the price of oil. In advanced countries, the low level of unemployment has also favored the recovery. Even in Latin America, despite the economy still being weak, companies recovered traffic “robustly”, according to IATA. Demand today is at 94.2% of the pre-crisis level, only below that seen in North America (95%).

“Energy prices are driving up inflation and being passed on to consumers. I think it’s unfair for people to criticize airlines when they don’t have a choice,” says Walsh. “Airlines are losing money, costs are going up. They have to take all the measures they can to survive in this environment.”

*The reporter traveled at the invitation of IATA

The information is from the newspaper. The State of São Paulo.

About Yadunandan Singh

Born in 1992, Yadunandan approaches the world of video games thanks to two sacred monsters like Diablo and above all Sonic, strictly in the Sega Saturn version. Ranging between consoles and PCs, he is particularly fond of platform titles and RPGs, not disdaining all other genres and moving in the constant search for the perfect balance between narration and interactivity.

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