Air fare gone sky highWednesday, July 21, 2021
BY ANDREW LAIDLEY
As vaccination rates increase across the world more people are packing their bags and heading to the airports. Already, international airlines are reporting a surge in passengers travelling for leisure.
This is a signal that although the novel coronavirus pandemic is still ongoing, things are slowly getting back to normal. But it also means that the days of low airline ticket prices are coming to an end. With demand climbing to pre-pandemic levels, airlines are no longer scurrying to fill seats and prices have already started to soar.
Local aviation expert Audley Deidrick explains that the price hike is all based on economics; “the demand for travel seems to be outpacing the capacity of aircraft in the airline's ”fleet”. Simply put, there are more passengers than available airline seats.
He explained that demand soared to 57 per cent this year compared to 2019, however, airlines can only fill 47 per cent of that demand.
“When COVID-19 just struck a number of airlines went belly up but those who did not go belly up had significant reductions in fleet size. They had to park or surrender some of their aircraft leases to stay afloat,” said Deidrick.
But that's not the only problem.”The airlines are able to adjust their prices in response to market demand and supply because generally speaking, airlines and airfares are not regulated the way that other aviation charges are regulated, so they are not fixed,” he continued.
He said that's why ticket prices fluctuate depending on the season. “It's also a trade-off between domestic ticket prices versus international ticket prices because more aircraft would have been assigned to fill their domestic routes which were more reliable and more lucrative, hence limited seats at times going on the international leg,” Deidrick noted.
In 2020 the airline industry suffered US$126 billion in losses and while there is a forecast recovery this year, the losses are still expected to be in the order of US$47 billion. “When you have those types of losses and the demand for travel is also knocking at your door and you're not restricted by any regulation to price your ticket, then you can understand why prices are going up,” said Deidrick.
Both the International Air Transport Association (IATA) and the Airport Council International (ACI), which represent airports, are forecasting that the industry will generate approximately 53 per cent of the 2019 traffic levels this year, which is still some way off from achieving the full 2021 traffic levels. At the same time, the forecast among different industry authorities (International Civil Aviation Organization, Airport Council International and International Air Transport Association is for the industry to return to pre-pandemic levels between 2024 and 2025.
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