Air fares to rise despite soaring profits

In its economic outlook, the organisation said passenger yields - or the average amount paid by a passenger to fly one mile - are expected to increase by 3.2% this year. Picture: REUTERS/Amr Alfiky

Air passengers are facing a hike in the cost of their flights, the aviation industry has warned, even as it forecasts trillion-dollar revenue for 2024 on the back of record passenger numbers.

Elevated fuel costs, increased environmental requirements and the continued shortage of new aircraft are being blamed for further increases in fares to come this year.

Airlines have gathered in Dubai for the annual meeting of the International Air Transport Association (IATA) headed by former Aer Lingus chief Willie Walsh.

In its economic outlook, the organisation said passenger yields - or the average amount paid by a passenger to fly one mile - are expected to increase by 3.2% this year. 

In part, that is because capacity growth is constrained, driving up average fares. However, global airlines also raised their profit forecast for 2024 to $30.5bn (€28bn) on revenues just shy of $1 trillion (€919bn) as a record number of travellers board flights. 

Passenger revenues are expected to reach $744bn (€684bn) in 2024, up 15.2% from $646bn (€593.9bn) in 2023.

Despite the profits, Willie Walsh said the airlines' net profit margins of 3.1% are 'too thin'. 

"Earning just $6.14 (€5.64) per passenger is an indication of just how thin our profits are—barely enough for a coffee in many parts of the world." 

Walsh said resolving supply chain issues along with relief from the "parade of onerous regulation and ever-increasing tax proposals" are needed to improve profitability.

He said more taxes are not the solution to achieving net zero and that the current “parade of fragmented green tax proposals” are prohibiting people from flying sustainably and grounding all but the rich.

The aviation industry has rebounded strongly and much quicker than many had forecast when global covid restrictions ground much of the world's fleet for more than a year. While passengers have returned, the industry continues to grapple with a range of issues including a lack of sustainable aviation fuel (SAF) needed to help cut greenhouse gas emissions.

Walsh said there is no need to reduce growth in global aviation to achieve an industry target to meet net zero carbon emissions by 2050 and said the costs of the transition to net zero would ultimately have to be passed on to passengers.

Aviation growth has also been hindered by the availability of new, more efficient aircraft with plane makers Boeing and Airbus struggling to meet demand. 

Speaking to the Irish Examiner, Kenny Jacobs the head of the Daa which operates Dublin and Cork Airports said that while it was expected fares would increase globally he would hope that Irish consumers would be somewhat insulated. 

"Globally, it is a supply and demand issue and any capacity constraints will increase fares. There are well-flagged issues with the supply of Boeing aircraft that are impacting many airlines. While there could be further increases for Irish consumers, we have a relatively mature market with established airlines," he said. 

"Ryanair and Aer Lingus have about 90% of the market out of Cork and 75% of the market from Dublin. Any aircraft shortages have been well flagged and we do not expect any aircraft to be withdrawn from routes here that would reduce capacity."

Meanwhile, Aer Lingus pilots have voted overwhelmingly to reject a Labour Court recommendation of a 9.25% pay rise which was significantly below the almost 24% increase they were seeking. The pilots union IALPA has been in a lengthy pay dispute with the company. The union's executive had recommended rejection of the deal but agreed to put it to a vote of its members. The ballot shows 94.4% of pilots rejected the proposal on a turnout of just under 98%.

In a statement, Aer Lingus said it noted the outcome of the ballot. 

"Notwithstanding the rejection of the Labour Court recommendation, Aer Lingus remains available for direct discussions with IALPA."