During their annual media days, the International Air Transport Association (IATA) told reporters that the cost of “going green” and decarbonization could end up trickling down into the price of airfare in the future.
Airlines Begin to Recover from Pandemic, But Decarbonization Costs Increasing
In their annual address to the media, IATA director general Willie Walsh noted the aviation industry is poised to come back stronger in 2023. Across the industry, airlines are expected to lose only $6.9 billion by the end of the year – an improvement of nearly $3 billion from the projections at the 2022 Annual General Meeting. By 2023, carriers are projected to collectively post a profit of $4.7 billion, translating to a 0.6% net profit.
Walsh attributed the costs to several factors. Among them are government regulations, actively decarbonizing fleets and transitioning to sustainable aviation fuel, and labor costs.
“Many airlines are sufficiently profitable to attract the capital needed to drive the industry forward as it decarbonizes. But many others are struggling for a variety of reasons,” Walsh said in a press release. “These include onerous regulation, high costs, inconsistent government policies, inefficient infrastructure and a value chain where the rewards of connecting the world are not equitably distributed.”
When pressed further during a media availability, Walsh conceded that the costs may ultimately end up resulting in higher airfare for flyers. His arguments are based around inconsistent government policies and sustainable aviation fuel availability. While the U.S. is focused on more SAF production, Walsh claims the European Union’s plan to require airports to stock sustainable fuels without increasing production is counterproductive.
“You cannot expect an industry making on average $1 profit per customer to absorb the increases we’ve seen,” Walsh said, as quoted by Reuters. “Going forward as we see increases in carbon costs…there has to be an impact on ticket prices as the industry transitions to net zero. The airlines cannot absorb increased costs.”
Capacity Expected to Increase in Many Global Aviation Markets
Although prices could be climbing higher for North American flyers, the good news is that more domestic and international capacity will be available in 2023. IATA projects that North American airlines are expected to serve 97.2% of pre-pandemic demand, increasing to 98.3% of capacity compared to 2019. European carriers are expected to have a capacity growth of 6.1%, while the Middle East airlines should increase capacity by 21.2%.
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Source: frugal travel guy