Rising airline costs and supply chain shortages, combined with the price-tag of eco-friendly practices, will push up airfares at a time when carriers need to claw back profit after two years of crippling losses due to the COVID-19 pandemic.
Virgin Atlantic CEO, Shai Weiss, in an interview broadcast on Bloomberg.com, warned that airfares could get a lot more expensive in 2022.
He said inflationary costs were a major risk, not just for an airline but for everyone in the industry right now. “I am assuming we will need to pass some of it on in the form of prices – all of us need to become more efficient.”
There is a good chance a looming fares increase could depress air travel in the SA market. In the South African market, prior to the COVID pandemic, a large proportion of airline seats were occupied by business people travelling at the expense of their company. Prior to March 2020, a significant increase in airfares might have been simply absorbed by those companies. But now that the proportion of leisure travellers is much higher than before 2020, and they are spending their own money, airlines will no doubt meet consumer resistance to fare increases.
Carol-Anne Williams, Office Manager at Sure Maritime Travel, believes that her clients will think twice about travelling if there is a substantial hike in airfares. “I have been getting some really good, competitive fares from different airlines and that has definitely encouraged my clients to travel, despite the extra money they are having to spend on COVID tests and the difficulty of travelling post-COVID. They will not be happy having to fork out more money for air tickets and will likely see an increase in airfares as a move from airlines to make up what they lost during COVID, expecting passengers to just suck it up.”
An unidentified Emirates spokesperson from EK’s head office in Dubai, told Tourism Update that, like all airlines, Emirates’ airfares varied throughout the year depending on market forces, the competitive environment, seasonal effects, travel demand recovery, consumer booking behaviour and jet fuel prices. “Fuel costs have risen sharply compared with last year, and we are watching the developments on this front closely as it is currently the largest component of our operating costs and will continue to be for some time. We are working hard to offset escalating costs through cost-containment measures wherever possible. In spite of the challenges of the current operating environment, we believe our fares have always been and continue to be competitive and our value for money proposition is as strong as ever.”
Boris Ogursky, Media Spokesperson for the Lufthansa Group, said in response to Tourism Update’s questions, that the airline would soon be addressing rising costs. “We regularly present our financial situation on the Lufthansa Group website, where our costs are explained. We continue to be transparent about our position. On March 3 the group will present the annual results for the last year and discussions will be held about rising airline costs and how to contain them. Our fares change constantly in order to be competitive with other airlines, depending very much on supply and demand.”
SAA Interim Executive: Commercial, Simon Newton-Smith, said airlines had been severely affected by higher oil prices. “SAA consistently evaluates this impact on operations and, where necessary, will adjust its airfares. Unfortunately, the upward trend in oil prices will mean increases in airfares.”
