Airline tickets can be more expensive, thanks to a lack of refining capacity and the financial health of airlines, said William Walsh, director general of the International Air Transport Association (IATA).
The decline in refining capacity during the pandemic and higher jet fuel prices caused by increased fuel demand are “worrying” for the airline industry, Walsh told CNBC’s Hadley Gamble on Wednesday.
US refining capacity fell 5.4% in 2022 from a peak in 2019, the lowest in eight years. The drop came as a result of refinery closures and conversions to produce more renewable fuels.
Walsh added that while consumers are paying higher prices, airlines aren’t necessarily making a profit.
“And given the financial state of many airlines… It’s not that the airlines are making money, [they] they’re just passing on a cost that they can’t absorb themselves and can’t avoid,” he said.
Russia-Ukraine war
But another factor could contribute to the increase in ticket prices: Russia’s announcement of a military mobilization, Qatar Airways CEO Akbar Al Baker said.
Russian President Vladimir Putin announced a partial military mobilization in Russia on Wednesday, putting the country’s population and economy in a state of war as Moscow’s invasion of Ukraine continues.
Al Baker told CNBC that China’s Covid policies are the “smallest”. [his] concerns,” and that the airlines’ biggest concern is the escalating 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.”
“I’m also concerned about…the [instability] of the price of oil, which I don’t want to pass on to passengers, which will then discourage them from traveling”.
Oil prices rose more than 2 percent after Putin’s announcement, following concerns of an escalation in the war in Ukraine and tightening oil and gas supplies.
However, 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 ordinary people.”
Hope for affordable sustainable fuel
Al Baker called for more investment in alternative fuels and that Qatar Airlines is “ready to invest in sustainable aviation fuel” on the condition that it is “reasonably priced”.
“I have no problem [paying] a little more, but they can’t pay four or five times the price of regular fluorinated gas.” Fluorinated gases, also known as fluorinated gases, are man-made gases applied in various industrial uses.
“If we are pushed to do it, you as a passenger will pay,” he said.
Walsh echoed his hopes to see more investment in sustainable aviation fuel production instead of traditional refineries, citing environmental concerns.
Last year, IATA set a target for the global airline industry to achieve net zero carbon emissions by 2050.
“Sustainable aviation fuels represent the industry’s best option to reach our goal of net zero by 2050.”
