‘Flying to be more expensive with higher fuel prices and sustainability perspectives’

September 26, 2022

Flying will be more expensive for air travellers amid higher fuel prices and as the aviation industry increasingly sets its sights towards sustainability, according to officials featured at the 8th IATA World Financial Symposium which concluded in Doha recently.

Speaking during a session on ‘Major Economic Risks Facing the World’, Chief Financial Sector Officer at the Qatar Financial Centre Authority (QFCA) Henk Jan Hoogendoorn discussed the major economic risks facing the aviation industry including inflation, interest rates, fuel prices, labour costs and availability, as well as geopolitical risks and climate risk.

Speaking to The Peninsula on the sidelines of the event, Hoogendoorn reiterated that the airline industry will demand more fuel efficient planes which are more environmentally friendly and sustainable.

He said: “People will be more and more environmentally responsible. So airlines are forced into let’s say taking biofuel, sustainable aviation fuel (SAF), or even electrical planes in the future. In general, the airlines need to increase the ticket prices, because flying will not be cheap in the future. Otherwise, airlines cannot make a profit. So we have to take into account that flying is expensive, and responsible'.

According to market reports, the aviation industry needs to spend billions of dollars to go green, which eventually leads to higher ticket prices for airline passengers. The SAF mandate on its own was said to increase the fuel cost for airlines by about 3 percent by 2030, with an impact on ticket prices of about 1 percent.

“It’s a polluting industry, and you have to be a responsible airline. I’m pretty sure that all the airlines grow into more environmental-friendly planes, maybe ultimately electrical planes. Canada has recently bought 30 electrical planes for short-term distances. Those things we will see. The airline industry will demand more fuel efficient planes, so they’re flying with different energy sources,” Hoogendoorn added.

Earlier addressing the media, Director General of the International Air Transport Association (IATA) Willie Walsh also highlighted the impact of the current global inflation to the industry.

He said: “There’s an expectation that airlines can absorb a significant increase in oil price. That’s just not going to happen. The airlines operating in 2022 have been shielded from the significant height of consumer oil price. As that hedging declines, more and more airlines will be exposed to higher price. And what’s significant for airlines that goes beyond the lightning inflation that other people have seen in terms of energy inflation is that the difference between the crude oil and the jet fuel has been at the highest levels. And that reflected a lack of refining capacity in the production of jet kerosene, but also the fact that the refiners and the oil producers were making significant profits.

“So hopefully we’ll see some of these being corrected. But the bottomline is given that fuel is a significant element of airlines cost-based, if that goes up the only way that airlines can coverage is to have that higher oil price reflected in the price increase, which is in fact what we are seeing in the current year, and likely to see in 2023,” added Walsh.

He went on to stress the need for fuel producers to put more investments in production of sustainable fuels, such as SAF.

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