After suffering a loss of over USD 200 billion since the Covid pandemic started, the airline industry is finally starting to turn a profit. Passengers are returning to travelling both domestically and internationally. 2022 is projected to fly 3,432 million passengers, making it 75% of the pre-pandemic (2019) amount and an increase of 50% since 2021.
After suffering a loss of over USD 200 billion since the Covid pandemic started, the airline industry is finally starting to turn a profit. Passengers are returning to travelling both domestically and internationally. 2022 is projected to fly 3,432 million passengers, making it 75% of the pre-pandemic (2019) amount and an increase of 50% since 2021.
However, flying is as expensive as it has ever been. Published airline ticket prices are up over 50% compared to last year, and up 40% since the beginning of the year. According to a study done by Mastercard Economics Institute, in the US the cost of flying from Singapore was on average 27% higher in April than in 2019, while flights from Australia were 20% more. The consumer price index for US airline fares is at its highest point ever at 336 in May. This is a 25% increase from May of 2019 and a 38% increase from last year. This was also the largest jump since the Federal Reserve of St. Louis began tracking the index in 1989. With the US reporting its highest inflation in 40 years and many other countries like Turkey and Euro area struggling with the same problem, jet fuel is outpacing them all.
One of the main reasons for the drastic price increase is soaring jet fuel costs. In general, after the start of the war in Ukraine, oil prices shot up and the price of jet fuel increased even more. According to IATA, the price of jet fuel has increased nearly 150% in the last year.
Even though prices are this high, many are happy to pay just to travel once again. Consumers have been saving up from all the missed holidays during the pandemic and are eager to finally have the opportunity. The so-called revenge traveller is “an individual that has been emotionally affected by the lockdowns and has craved travel over the last two years and they’ve dreamt about it,” said Hermione Joye, sector lead for travel in the Asia Pacific at Alphabet Inc.’s Google. Airlines have the opportunity to take advantage of the strong demand in the market, which can be reflected in the price.
In addition, airline companies are suffering from staff and pilot shortages. Many working in the industry made an early retirement when the pandemic broke out. As working in this field requires high skill and lots of training, it is not easy to recruit staff quickly. Singapore airport reported opening up 6,600 positions for hire in May. Airports throughout the UK reported staff shortages, which formed huge queues causing many delayed and missed flights. “It used to be that these types of issues affected 3% to 5% of our clients’ trips, now it’s easily 20%, if not 25%,” says Jack Ezon, founder and managing partner of Embark Beyond. Many airlines chose to reduce their flights to give themselves more room in the schedule. This decision will result in fewer unexpected flight cancellations, but on the other hand, fewer flights mean higher prices.
“The rise in prices is a short-term phenomenon,” estimates Stephen Tracy, chief operating officer at Milieu Insight, a Singapore-based consumer insight and analytics firm. “Let’s all just hope that once these things equalize again, the prices come back down. I am fairly confident that they will.”
