IATA Director General Willie Walsh has told the BBC airlines will have to increase fares in response to rising jet fuel costs.
Ongoing conflict in the Middle East and the closure of the Strait of Hormuz has caused fuel prices to soar, while fears escalate over potential shortages. Markets in Europe and Asia are especially dependent on imports from the region, but Walsh said that was no reason to panic about mass cancellations.
Nevertheless, he notes that Europe’s busy summer schedules will place further strain on a supply chain already under stress:
You normally expect to see a 25% increase in flights and fuel requirements in the months of July and August versus, let’s say March. I think the concern will be that if sufficient alternative supply isn’t sourced, there may be some shortages when we get into the peak summer period.
All signs point to higher fares to help airlines manage increased costs. However, some airlines have actually lowered ticket prices in an effort to drive more bookings with wary travellers. Walsh notes that, while this strategy might shore up revenue in the short term, airlines will still have to rise prices in the near future:
There’s just no way airlines can absorb the additional costs they’re experiencing. There may be some instances where airlines will discount to stimulate some traffic flow… but over time it’s inevitable that the high price of oil will be reflected in higher ticket prices
Even if the Strait of Hormuz is reopened this week, the long-term repercussions could be felt by the aviation industry into 2027. Airlines need to implement constructive strategies to manage these difficulties and retain customer trust in an ever more fragmented geopolitical ecosystem.
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