September 23, 2022:-Air tickets may become more expensive thanks to the lack of refining capacity and the financial state of airlines, said William Walsh, the director-general of the International Air Transport Association (IATA).
The decline in refining capacity during the pandemic and higher jet fuel prices caused by the increase in demand for fuel is “of concern” to the airline industry, Walsh told on Wednesday.
U.S. refining capacity dropped by 5.4% in 2022 since it peaked in 2019, the lowest in eight years. The dip came from refinery closures and conversions to produce more renewable fuels.
Walsh added that while consumers are paying higher ticket prices, airlines are not necessarily making a profit.
“And given the financial state of many airlines. It’s not that airlines are making money, are just passing on a cost they can’t absorb themselves and can’t avoid,” he said.
Airline ticket prices have spiked by 25% in the past year, the most significant annual jump since 1989. In April alone, airfares surged by 18.6%, according to the Bureau of Labor Statistics.
But another factor could contribute to even higher ticket prices — Russia’s announcement of military mobilization, said Qatar Airways CEO Akbar Al Baker.
On Wednesday, Russian President Vladimir Putin announced a partial military mobilization in Russia, placing the country’s people and economy on a wartime footing as Moscow’s invasion of Ukraine continues.
Al Baker told that China’s Covid policies are the “smallest of [his] worries” and that the airlines’ most significant concern is the escalation of the Russia-Ukraine war.
“For me, the biggest worry is the conflict spreading, which [will then] fuel inflation, putting more pressure on the supply chain,” he added. “The net result will be fewer passengers in my airplane.”
“It also worries me the [instability] of the oil price, which I don’t want to pass to the passengers, which will discourage them from traveling.”
Oil prices jumped by more than 2% after Putin’s announcement, following concerns of an escalation of the war in Ukraine and squeezing oil and gas supplies.