Air tickets may become more expensive, thanks to a lack of refining capacity and the financial state of airlines, said William Walsh, director general of the International Air Transport Association (IATA).
Declines in refining capacity during the pandemic and higher jet fuel prices caused by increased fuel demand are “concerning” for the airline industry, Walsh told CNBC’s Hadley Gamble. on Wednesday.
US refining capacity fell 5.4% in 2022 from its peak in 2019, the lowest in eight years. The drop came on the back of refinery closures and conversions to produce more renewable fuels.
Walsh added that while consumers pay higher ticket prices, airlines don’t necessarily make a profit.
“And given the financial state of many airlines… It’s not that the airlines are making money, [they] they’re just passing a cost that they can’t absorb on their own and that they can’t avoid,” he said.
But another factor could contribute to ticket prices being even higher: 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 people and economy on a war footing as Moscow’s invasion of Ukraine continues.
Al Baker told CNBC that China’s Covid policies are the “smallest of [his] concerns,” and that the airlines’ biggest concern is the escalation of the war between Russia and Ukraine.
“For me, the biggest concern is the expansion 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 worried… [instability] of the price of oil, which I don’t want to pass on to passengers, which will then dissuade them from travelling”.
Oil prices rose more than 2% after Putin’s announcement, following concerns of an escalation of the war in Ukraine and reduced 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 serving ordinary people.”
Hopes for an affordable sustainable fuel
Al Baker called for more investment in alternative fuel 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 F-gas.” F-gases, also known as F-gases, are man-made gases applied in various industrial uses.
“If they force us to do that, you as a passenger will pay for it,” he said.
Walsh echoed his hopes to see more investment in sustainable aviation fuel production rather than traditional refineries, citing environmental concerns.
Last year, IATA set a goal for the global air transport industry to achieve net zero carbon emissions by 2050.
“Sustainable aviation fuels represent the best option for the industry to achieve our goal of net-zero emissions by 2050.”