Airlines plan higher fares after soaring energy prices
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Willie Walsh, chief executive of the International Air Transport Association, participates in a panel discussion during the International Air Transport Association (IATA) Annual General Meeting in Boston, Massachusetts, U.S., October 5, 2021 .REUTERS/Brian Snyder
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PARIS, April 6 (Reuters) – Airlines will pass on higher oil prices relatively quickly to passengers through higher fares, but soaring energy costs will worsen the industry’s overall outlook in 2022 , the head of the International Air Transport Association said on Wednesday.
Speaking after JetBlue (JBLU.O) launched a counter-bid for US airline Spirit Airlines (SAVE.N), chief executive Willie Walsh also said he saw more scope for consolidation among the airlines airlines in the United States.
“It clearly took the market by surprise,” Walsh said during a regular industry press briefing.
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“It’s proof that the financial strength of US airlines stands out from the rest of the world,” he said, adding that consumers have benefited from major investments in new products.
IATA said global passenger traffic rebounded in February as the impact of the Omicron variant receded outside of Asia. The war in Ukraine has not yet been taken into account in the monthly data.
In February, passenger traffic stood at 54.5% of the levels seen in the same month of 2019, up from 50.6% in January but below the 55.1% seen in December. Freight volumes were 111.9%.
Airlines are grappling with rising oil prices that accelerated after Russia invaded Ukraine, a move Moscow describes as a “special military operation”.
The rise worsened an already expected outlook to include an industry-wide loss in 2022, although some airlines will make a profit as the world experiences an uneven recovery, Walsh said.
In the past, the rule of thumb was that oil prices took six months to trickle down to air fares, he added.
But that could happen faster due to dramatic market volatility as well as lower than normal levels of forward bookings already in the system post-pandemic.
Walsh also said airlines and airports were working to address staffing shortages after demand surged, but some factors were beyond their control.
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“The challenge the industry faces is getting front-line staff back to where they need security background checks,” Walsh said, adding that a process that previously took five to six weeks takes “a lot longer. a long time now”.
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Reporting by Tim Hepher; Editing by Mark Potter, David Evans and Alexander Smith
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