AviationDespite headwinds, the aviation industry is headed for a fragile recovery, which should eventually lead to stabilisation in airfare levels, says report.

Sky-high airfares likely to descend

Airfare prices are projected to stabilise once the airline industry takes off, experts say.
Airfare prices are projected to stabilise once the airline industry takes off, experts say. Photo Credit: GettyImages/RalfLiebhold

Current high prices of airfares are unlikely to continue and and are projected to moderate significantly by 2023, a report from aviation consultancy firm Centre for Asia Pacific Aviation (CAPA).

Airlines will need to scrutinise the impact of higher fares on global demand.
“International traffic is expected to reach 55-60 million passengers, around 20% below pre-Covid,” said the CAPA report.

For airlines, while the surge in passenger demand has not abated, this post-Covid phase is characterised by a hostile cost environment, increased competition and tough economic conditions, a combination that will prove highly challenging, the report said.

For next year though, airline losses are projected to stabilise from around "USD 3 billion in FY2022 to around US$1.4 billion,” the report said, which should translate into a dip in airfare price levels.

Meantime, preliminary May 2022 month-to-date traffic figures released by the Association of Asia Pacific Airlines (AAPA), based on data by 40 full service carriers in the region, showed that international air passenger demand has strengthened, amidst the lifting of travel restrictions in a number of countries.

For the month, the number of international passengers carried by Asia Pacific airlines increased more than five-fold to a combined total of 7.3 million, a 461% jump versus 2021, and approaching 23.6% of volumes recorded in May 2019 .

The jump in demand, combined with a relatively more moderate 114.8% expansion in available seat capacity, pushed the average international passenger load factor up to 71.5% for the month, narrowing the gap to levels achieved before the pandemic brought international travel to a standstill.

Commenting on the results, Mr. Subhas Menon, AAPA director general said, “As the region’s airlines emerge from the deepest and most prolonged crisis ever faced, keeping a lid on costs remains vital, as escalating fuel expenditure, higher labour and maintenance costs, on top of substantially heavier debt burdens, threaten to undermine the already fragile financial recovery.”

“Nevertheless, the healthy increase in international passenger demand and corresponding recovery in load factors lends some cause for optimism, as the region’s airlines continue to streamline operations while investing to improve the travel experience as part of ongoing efforts to achieve a sustainable and technology-enabled future for air transport," he concluded.

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