Airfares may become more expensive — thanks to the lack of refining capacity and the financial condition 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 due to increased fuel demand are “worrying” for the airline industry, Walsh told TAUT’s Hadley Gamble on Wednesday.
Refining capacity in the US fell 5.4% in 2022 since its peak in 2019 – the lowest in eight years. The dip came in the wake of refinery closures and conversions to produce more renewable fuels.
Walsh added that while consumers pay higher ticket prices, airlines aren’t necessarily making a profit.
“And given the financial condition of many airlines… It’s not that airlines make money, [they] are only passing on costs that they cannot bear and that they cannot avoid,” he said.
War between Russia and Ukraine
But another factor could contribute to even higher ticket prices: the announcement of a military mobilization by Russia, Qatar Airways CEO Akbar Al Baker said.
Russian President Vladimir Putin on Wednesday announced a partial military mobilization in Russia, putting the country’s population and economy into wartime as Moscow’s invasion of Moscow continues.
Al Baker told TAUT China’s Covid policy is the “smallest of” [his] concerns”, and that the airlines’ main concern is the escalation of the war between Russia and Ukraine.
“For me, the biggest concern is the spread of the conflict, which… [will then] fuel inflation, putting more pressure on the supply chain,” he added. “The net result will be fewer passengers on my plane.”
“It worries me too… the [instability] of the oil price, which I don’t want to pass on to passengers, which then discourages them from traveling.”
Oil prices rose more than 2% after Putin’s announcement, amid concerns about an escalation of the war in Ukraine and shrinking oil and gas supplies.
Nevertheless, Al Baker maintained that Qatar will continue to fly to Russia as long as it is operationally safe to do so.
“We will continue to fly to Russia, we will continue to serve the people… We are not a political institution. We are an industry that serves the common people.”
Hope for affordable sustainable fuel
Al Baker called for increased investment in alternative fuel and that Qatar Airlines is “ready to invest in sustainable jet fuel” provided it is “reasonably priced”.
“I have no problem [paying] a little more, but they can’t afford four or five times the price of a regular F-gas.” F-gas, also known as fluorinated gases, are man-made gases used in various industrial applications.
“If we are forced to do that, you as a passenger will pay for it,” he said.
Walsh reiterated his hopes for increased investment in sustainable aviation fuel production rather than traditional refineries, citing environmental concerns.
Last year, IATA set a target for the global air transport industry to achieve net zero carbon emissions by 2050.
“Sustainable jet fuels are indeed the industry’s best option to reach our goal of net zero by 2050.”