Air travelers are faced with more expensive airline tickets due to insufficient kerosene production, which has dramatically increased the cost of flight operations.
Airfare ticket prices have risen 25 percent this year, the biggest annual jump since 1989.
However, airlines have not benefited much from higher ticket prices as rising operating costs have been passed on to consumers.
A combination of a post-pandemic surge in travel demand coupled with airlines having 15 percent less capacity than 2019 resulted in fewer available seats on flights.
Airlines and airports have drastically reduced their staff of pilots and support crews over the past two years, causing staffing shortages and flight cancellations after restrictions were lifted.
This came on top of the airline industry’s pre-existing debt, which was high well before the pandemic, leading to additional price spikes.
Meanwhile, ongoing labor shortages and supply chain issues are also impacting air fares as they reduce maintenance, repair and overhaul capacity.
This has made it difficult for airlines and lessors to return grounded aircraft during the pandemic, as demand for available aircraft increases again faster than they can be made available.
“And given the financial state of many airlines… It’s not that airlines make money, [they] only pass on costs they cannot bear and cannot avoid,” said William Walsh, the director-general of the International Air Transport Association (IATA) in an interview with CNBC on Sept. 21.
Green energy meets aviation reality
Walsh also said a drop in refining capacity during the pandemic and a surge in fuel demand are another major concern for the airline industry.
Refining capacity in the United States has fallen 5.4 percent this year from its peak in 2019 during the Trump administration, the lowest in eight years.
The drop in fuel production came after the closure of several refineries and strong pressure from the Biden administration to switch jet fuel plants to produce more renewable alternatives.
But the IATA director broadly agrees with President Biden’s green plan to increase investment in the production of sustainable aviation fuel rather than expand traditional refineries.
“Sustainable aviation fuels represent the best option the industry has to achieve our goal of net zero by 2050,” said Walsh.
In October 2021, IATA announced its Sustainable Energy Goal for the global aviation industry to achieve “net zero” carbon emissions by 2050.
“The world’s airlines have made a momentous decision to ensure flying is sustainable. Post-COVID-19 reconnection will be on a clear path toward net zero,” Walsh commented on the organization’s website.
“With concerted efforts across the value chain and supporting government action, aviation will achieve net-zero emissions by 2050.”
However, not all aviation executives fully agree with the airline association’s global sustainability vision.
“If we are pushed to do this, you as a passenger will pay for it,” Qatar Airways CEO Akbar Al-Baker told CNBC.
“I do not have a problem [paying] a little more, but you can’t pay four or five times the price of regular F-gas,” he said, referring to industrial fluorinated gas commonly used in air cooling.
The airline CEO was not fundamentally opposed to further investments in alternative fuels and said he actually supports them.
He told CNBC that Qatar Airlines is “ready to invest in sustainable jet fuel” on condition that it is “reasonably priced”.
Others are also hesitant about the push for sustainable aviation fuels in the industry.
“From today’s perspective, three times more expensive for those using post-consumer recycled oils, five times more expensive for biomass and five to 10 times more expensive for synthetic fuels,” Jean-Baptiste Djebbari, France’s transport minister, told Agence France-Presse.
Djebbari said airfares could rise “in the short term” due to energy shortages.
Russia and the future of air travel
Another factor that could contribute to even higher ticket prices, according to Al-Baker, is the escalation of the conflict between Russia and Ukraine.
Russian President Vladimir Putin on September 21 announced a partial military mobilization of Russian forces, bringing the country and its economy to a war base dictation.
According to the Bureau of Labor Statistics, air fares rose 18.6 percent in April after the conflict in Ukraine began.
Many airlines are concerned about this escalation of the conflict because of the threat it poses to already strained energy supplies and the significant disruption to flight schedules.
“The biggest concern for me is the spread of the conflict [will then] Fuel inflation, putting more pressure on the supply chain,” the airline’s CEO told CNBC, noting that China’s lockdowns are the “smallest of them.” [his] To care.”
“The net result will be fewer passengers on my plane,” he said, but “it also worries me … that.” [instability] the price of oil, which I don’t want to pass on to passengers, which then discourages them from travelling.”
Oil prices rose more than 2 percent after the Russian president announced the mobilization amid fears the conflict could spiral out of control.
Al-Baker told CNBC that his airline will continue to fly to Russia as long as it is 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,” he said.