New Delhi: Airlines will try to hike fares to an extent that they can cover the costs, but depending on which population one is looking at, there will be people who will be priced out of flying as relative price differences will impact choices, a senior IATA executive has said.
The remarks come against the backdrop of airfares rising as airlines seek to recoup some of the costs of the oil price shock due to the West Asia disruptions. Jet fuel prices are expected to be 70 percent higher in 2026 compared to last year.
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The International Air Transport Association (IATA) represents over 370 airlines that account for around 85 percent of the global air traffic.
IATA's Chief Economist and Senior Vice President for Sustainability, Marie Owens Thomsen, said airlines would obviously try to do their best to hike the fares to such an extent that they can cover the costs.
"If they can't raise the fares, they become loss-making, they could become bankrupt…," she said at a briefing here on Sunday.
She was responding to a PTI query on how long airlines can hike fares without resulting in demand destruction, wherein passengers might decide not to travel due to high ticket prices.
While stressing that there was no simple answer to that question, Thomsen said, "Depending on what population you are looking at, there will be people who will be priced out of flying."
"Relatively different prices will affect people's choices and their alternatives depend on where they live and where they try to go.
"Consumer behaviour will surely change in response to this, but it is difficult to say in a blanket kind of way that people everywhere are going to behave in way X and that people will behave in way XYZ depending on where they are and their income," she noted.
IATA on Sunday said passenger ticket revenues are expected to rise 9.2 percent to USD 839 billion this year compared to USD 768 billion in 2025.
"Considering this outpaces expected demand growth of 2.1 percent (measured in RPK or revenue passenger kilometres), air fares are rising in efforts to recoup some of the costs of the oil price shock.
"Passenger ticket yields are expected to grow by 7 percent and load factors are expected to set a new record high of 84.0 percent," it said.
According to Thomsen, the average observed behaviour is that airlines take 50 percent of their jet fuel price increases on their slim margins and they pass on 50 percent of the price surges to the passengers.
"That is the industry average over the long historic period," she said and added that historically, air ticket prices have not kept pace with consumer price inflation and oil price increases.
She was speaking on the sidelines of the IATA AGM in the Brazilian city.
While airfares have unavoidably risen in response to higher fuel prices, IATA said the average real return air fares (in US dollars, including ancillaries) are expected to be USD 462, which would be 26.3 percent lower than in 2016.
As per the grouping, fuel costs are expected to rise nearly 40 percent to USD 350 billion this year from USD 252 billion in 2025.
Jet fuel prices are expected to average USD 152/barrel for the year, up almost 70 percent against USD 90 in 2025.
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"The crack spread (premium for jet fuel over Brent crude oil) is expected to average USD 57/barrel, an historic high," it said.
Amid the steep rise in jet fuel prices and relatively softer travel demand, some of the Indian carriers have temporarily curtailed their flights.
Air India, Air India Express, IndiGo, SpiceJet and Akasa Air are part of IATA.
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