Why are Flight Tickets so Expensive?
After two years of lockdowns, it seems we are now beginning to turn the page on Covid. Today the outlook for aviation looks much more optimistic. Nevertheless, the situation is not the same as we would expect. The world has changed as a result of the covid itself and other factors such as international conflicts.
One of the most relevant changes we are experiencing is the price of flights which have significantly gone up. A Mastercard study found the cost of flying from Singapore was on average 27% higher last April than it was in 2019, while flights from Australia were 20% higher after the Covid outbreak (TIG Asia, 2022).
Behind these higher fares it is possible to identify five main reasons:
1. Big Aircraft are Still Parked.
With travel restrictions still in place in different countries, particularly in Asia, airlines are being cautious about bringing back big aircraft such as the A380s and the B747-8s. Fewer planes flying means fewer available seats, fewer direct routes and therefore a reduced offer to meet the rapidly rising demand.
2. The Rise in Fuel Prices.
Undoubtedly, the Russian invasion of Ukraine and consequently the restrictions on Russian oil exports from western economies have increased the price of petrol worldwide. Jet fuel can represent 38% to 50% of an airline’s costs (Bloomberg, 2022). As a result, airlines are passing the rise to passengers.
3. Passengers are not Particularly Sensitive to the Price.
After 2 years of restrictions, there is a good number of travellers who are eager to travel and therefore willing to pay higher prices in order to have those long-awaited holidays or reunite again with friends and relatives.
4. Short-Staffed Airlines.
The cut down of workforce made by the aviation industry during the peak of the Covid-19 pandemic left many airlines and airports with the minimum staff required. Under this new post-pandemic scenario, airlines are being forced to hire fast but unfortunately, many workers are not willing to rejoin a highly volatile industry. To attract these personnel, airlines are offering improved packages, extra bonuses and additional allowances. This situation gets even more critical given the long and detailed recruiting process the industry needs to comply with. I have expanded on this matter in my previous article: Understaffed Industry Struggles to Meet Demand.
5. Airlines’ Financial Statements.
Airlines lost more than $200 billion in the three years to 2022 (Bloomberg, 2022). At this very moment, airlines are driven to sell high-priced tickets to generate higher margins and lead towards the path of recovery.
On top of the above five reasons, there is the environmental factor. It has been forecast that that prices will continue to increase for the next five years as environmental charges start to take their toll (Financial Times, 2022).
Given all these factors, it seems uncertain for how long prices will continue to soar and for how long passengers’ budgets will resist.