How Are the Growing Economic Concerns Pressuring Airlines?
Consumers are surviving high airfares because of the pandemic’s pent-up demand. Still, as summer ends and inflation and interest rate hikes begin to bite, there are rising doubts about whether the thirst for travel is sustainable.
According to the International Air Transport Association (IATA), global airlines now should lose $9.7 billion in 2022; down from a revised $42.1 billion deficit in 2021, and return to profit in 2023, possibly. However, earnings are still considerably below pre-pandemic levels as heavily indebted carriers face new issues such as rising fuel prices and hefty payroll expenses; which they seek to pass on to customers through increased tickets.
Industry leaders gathered in Doha for IATA’s annual convention said that reservations for the next six months appeared to be quite solid; however, there was less confidence beyond that. Izham Ismail, the CEO of Malaysia Airlines, stated that the demand has been building for a long time. It is a journey of vengeance. The cost of flying has skyrocketed. It is not limited to Malaysia or Malaysia Airlines; it affects the whole business. Demand will dwindle if the price is high.
Airlines and the Rising Fuel Cost
Yields, a proxy for airfares, should grow by 5.6 percent globally this year, according to the International Air Transport Association (IATA). Air New Zealand Chief Executive Greg Foran explained that the rates were now 20 percent to 25 percent higher than pre-COVID levels; partly due to the more than doubling of fuel prices. They’re connecting with customers and informing them that the price increases they’re witnessing aren’t due to Air New Zealand seeking to recoup the money it’s lost over the previous 800-plus days. It’s about coping with the current cost difficulties that we face. In many nations, consumers are already confronting increasing prices for common things like food and fuel; which are growing faster than salaries.
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