Air tickets could become more expensive – thanks to the lack of refining capacity and the financial state of the airlines, said William Walsh, the director general of the International Air Transport Association (IATA).
The decline in refining capacity during the pandemic, and higher jet fuel prices caused by the increase in fuel demand are “of concern” for the airline industry, Walsh told CNBC’s Hadley Gamble on Wednesday.
US refining capacity fell 5.4% in 2022 since peaking in 2019 – the lowest in eight years. The drop came in the wake of refinery shutdowns and conversions to produce more renewable fuels.
Walsh added that while consumers are paying higher ticket prices, airlines are not necessarily making a profit.
“And given the financial condition of many airlines … It’s not that the airlines are making money, [they] just passing on a cost that they cannot absorb themselves and cannot avoid,” he said.
But another factor could contribute to even higher ticket prices – Russia’s announcement of a military mobilization, said Qatar Airways CEO Akbar Al Baker.
Russian President Vladimir Putin announced a partial military mobilization in Russia on Wednesday, putting the country’s people and economy on war footing as Moscow’s invasion of Ukraine continues.
Al Baker told CNBC that China’s Covid policy is the “least 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 conflict that is spreading, which [will then] fuel inflation, which puts more pressure on the supply chain,” he added. “The net result will be fewer passengers on my plane.”
“It worries me too… [instability] of the oil price, which I don’t want to pass on to the passengers, who will then discourage them from traveling.”
Oil prices rose more than 2% after Putin’s announcement, as concerns about an escalation of the war in Ukraine squeezed oil and gas supplies.
Al Baker nevertheless claimed 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.”
Hoping for reasonably 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 a regular F-gas.” F-gas, also known as fluorinated gases, are man-made gases used in various industrial applications.
“If we are pushed to do that, you as a passenger are going to pay for it,” he said.
Walsh reiterated his hope to see more investment in sustainable jet fuel production instead of traditional refineries, citing environmental concerns.
Last year, IATA set a target for the global air transport industry to achieve net zero carbon emissions by 2050.
“Sustainable jet fuel represents the industry’s best option to reach our goal of net zero by 2050.”