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Airline ticket prices are surging as the aviation sector grapples with challenges reminiscent of the post-9/11 era, a global aviation leader commented yesterday, amid the ongoing conflict involving Iran.
Willie Walsh, the former chief executive of British Airways, addressed an industry gathering in Brussels, highlighting that ticket prices for US-UK transatlantic flights would be the most severely and swiftly impacted.
Walsh acknowledged that while the current crisis isn’t as extensive as the Covid-19 pandemic—when air travel nearly came to a standstill—he noted, “It’s more comparable to the transatlantic disruptions following 9/11.”
After the United States faced its most devastating terrorist attack, the demand for transatlantic travel drastically decreased, requiring several months for recovery.
Walsh explained that, unlike their UK counterparts, US airlines tend not to purchase jet fuel in advance in large quantities. As a result, the increased costs due to the conflict are being passed directly to passengers more quickly.
Now boss of global industry body The International Air Transport Association, he added: ‘The US carriers have to put prices up, which means the [non-US] competitors at the other end will match the price increase because that’s the nature of the industry.
‘But it’s not just transatlantic prices that will rise, its prices everywhere. They’re already doing it, they’re putting prices up.’
Former BA boss Willie Walsh said crisis sparked by Iran war is ‘akin to the post-9/11 transatlantic issues’ at industry summit in Brussels
He said he believed airlines would be more likely to hike prices than cancel flights to recoup costs, adding: ‘I don’t think they’ll reduce capacity.
‘I think what will be done in the short-term is they’ll try and adjust the pricing so as to continue flying without running the risk of getting into debt. It’s a challenge.’
He said that while bookings were holding up, travellers are opting more for Western and Southern Europe and North Africa rather than eastern European destinations such as Cyprus or Turkey, which are closer to the conflict.
Whether or not airlines face having to cancel flights or increase fares can depend on how well ‘hedged’ they are.
This refers to how much fuel they bought in bulk at a certain price. Some airlines bought months’ worth of fuel before the conflict when oil prices were as cheap as $67 a barrel.
But as these stocks start dwindling, airlines face having to pass on higher costs or consider cancellations.
Several UK airlines are known to be well hedged, meaning steep fare rises for short-haul carriers like easyJet and Ryanair are likely to take longer to filter through.
However, if the Iran conflict drags on for several months, fares will almost certainly be hiked by the summer across most airlines.
The price of jet fuel in Europe soared to a record high this week – almost double what it was before the conflict started.
And there are fears of shortages if Iran’s retaliatory blockade of the Strait of Hormuz continues to squeeze Western oil supplies.
Ministers are drawing up plans for dealing with jet fuel shortages in the event the war drags on for months and months, according to Government sources.
If this transpires, ministers are expecting supply to be ‘constrained’, putting getaways at risk if airlines are asked to ration fuel.
Scandinavia’s largest airline – SAS – this week became the first major carrier in Europe to scrap flights because of surging fuel prices triggered by the Iran war.
On Tuesday it said it was scaling back flights because of the ‘sharp and sudden increase’ in jet fuel costs.
Air France-KLM and SAS have already said they will have to hike ticket prices due to the rising cost of jet fuel, while Finnair has warned that jet fuel supplies may run out due to the effective closure of the Strait of Hormuz.
There are fears that more airlines across Europe and in the UK will be forced to do the same if the conflict drags on.
A Department for Transport spokesman said: ‘We are engaging with British carriers to support their operations against the backdrop of war in the Middle East, and to limit the impact on industry.’