Executives at the world’s leading airlines believe aviation fuel prices will remain high for an extended period, potentially forcing carriers to raise ticket prices.
According to the Financial Times (FT), major airlines say high jet fuel prices have become the "normal" since the outbreak of the US-Iran conflict. Airline executives are preparing for challenges in the coming years, concerned that passengers may resist further fare increases needed to offset rising costs.
Previously, airlines had hoped that energy costs would decline following a sharp surge in prices caused by the closure of the Strait of Hormuz. However, industry executives now expect fuel prices to remain elevated for a prolonged period.
"I think we are going to have a difficult three to five years ahead of us. Demand is still there... But our ability to raise prices is limited," Luis Rodrigues, CEO of TAP Air Portugal, told the Financial Times.
Several other airline executives said they expected to revise their long-term growth plans amid concerns that demand could weaken as geopolitical instability fuels inflation.
US carrier Delta Air Lines said demand had barely weakened despite an average 20% increase in ticket prices this month. However, most airlines are preparing to raise fares further as hedging contracts designed to protect them against fuel price volatility expire.
According to the newspaper, Italy’s ITA Airways had secured approximately 80% of its fuel requirements before the fuel crisis began but has not signed new contracts since then. The airline’s CEO, Jörg Eberhart, said this would leave the carrier more vulnerable to price volatility next year.
Nevertheless, airline executives remain concerned that passengers’ willingness to travel could weaken in the near future.
Image: Andrew Kelly / Reuters