The High Cost of Flying: Exploring the Reasons and Future Outlook

Although the worst of the pandemic has passed, countries have reopened, and airlines expect to make decent profits now that business and leisure travel has resumed, ticket prices remain high. The lack of planes is one reason for this. Airlines had to ground a significant portion of their fleets because of the lackluster travel demand during the pandemic, and they are now struggling to bring them back into service quickly. It takes 100 working hours to get the largest jets ready for service after being parked away, which is a time-consuming process.

Another factor driving the high prices is consumer willingness to pay more for tickets after being denied the opportunity to travel for as long as three years in some cases. A Booking.com survey of more than 25,000 adults planning to travel in the next 12-24 months revealed that many of them wanted to be “more indulgent” with their itineraries to make up for lost opportunities. Marcos Guerrero, senior director of flights at the online travel company, noted that despite the slightly higher prices, many people still find value in investing in travel.

Unfortunately, ticket prices are likely to remain high for several years, according to Michael O’Leary, CEO of Ryanair Holdings Plc, Europe’s largest airline in terms of passengers carried.

Lack of Staff

The aviation industry faced a severe blow due to the Covid pandemic, incurring losses of almost $200 billion and resulting in millions of job cuts. Although travel is now bouncing back, the industry is grappling with the challenge of hiring enough personnel. Several highly skilled ex-aviation employees have opted for more stable career options in different fields.

As a consequence of the staffing crisis, delays at airport check-in counters, immigration booths, and baggage conveyors have escalated. Airlines are exerting more effort to attract and retain staff, necessitating improved remuneration. This, in turn, has caused airfares to soar as airlines strive to offset the added expenses.

High Oil Prices

Although fuel prices have dropped in the past year, crude oil remains more than 50% more expensive than in January 2019, presenting a challenge for airlines since fuel is their primary cost. Many carriers, particularly low-cost ones, do not hedge fuel, leaving them exposed to price spikes caused by events like Russia’s invasion of Ukraine.

Despite contributing just over 2% of global carbon emissions, airlines are trailing behind other businesses in commitments to a more sustainable future. This is partly due to the fact that sustainable aviation fuel, the only viable solution currently available, costs up to five times as much as traditional jet fuel.

The International Air Transport Association predicts that the industry will need to spend $2 trillion to become carbon neutral by 2050. To handle this cost, airlines will have to increase ticket prices, resulting in even higher airfare costs.

Although hydrogen-powered and electric aircraft are being explored as potential solutions, these technologies are primarily in the research stage and will be costly if they become viable.

Storage of Aircraft

At the peak of the pandemic, approximately 16,000 airplanes, which constitute roughly two-thirds of the global commercial fleet, were grounded. Inspecting every component to ensure safety requires an enormous task to make them airworthy again. Even though many of them were stored in deserts in the United States and Australia, where they are less prone to wear and tear, they may still have issues such as damaged engines and interiors.

Furthermore, aircraft manufacturers are struggling to keep up with demand as labor shortages at subcontractors have slowed down production. In addition, sanctions imposed on Russia have made it more difficult for Airbus SE, Boeing Co., and their suppliers to obtain raw materials like titanium, which has driven up the prices of parts.

Acquiring new engines is another obstacle. Spirit Airlines Inc. and India’s IndiGo, among others, have had to ground new aircraft because parts are in short supply, and manufacturers are struggling to produce new turbines. Some cutting-edge technologies also necessitate more frequent maintenance, as exotic metal alloys, coatings, and composites wear out more quickly.

“Capacity is a challenge,” remarked Ryanair’s O’Leary at a Bloomberg conference earlier this month. “In the medium term, Airbus and Boeing’s inability to deliver any significant increase in production means that capacity will continue to be a challenge for the next two, three, five years.”

Anticipating a surge of double digits this summer, he predicts that fares will increase by as much as 15% this year, following the price hikes that occurred last year.

China’s Slow Return

China, which was the world’s second-largest economy and responsible for nearly $280 billion in annual tourism spending before the pandemic, is still recovering from its aftermath. The Chinese government held onto virus containment measures such as citywide lockdowns for a longer duration than anywhere else, and individuals are not keen to risk traveling again, even after abandoning the Covid Zero approach. This has resulted in over 30% of Chinese travelers ruling out overseas travel in 2023, according to a survey published on Wednesday.

The Association of Asia Pacific Airlines predicts that it will take at least a year for China to return to pre-pandemic levels of international air travel. Domestic traffic is rebounding, reaching 2019 levels, but the broader reopening is taking much longer to recover after China’s approach left it more isolated and out of sync with the rest of the world. Consequently, airlines are anxious about reinstating all of their aircraft and capacity due to China’s slow reopening, resulting in fewer seats on international routes, reducing demand, and increasing airfares.

“Airlines are still struggling to fully recover from the pandemic,” stated Clint Henderson, managing editor of the frequent-flyer website The Points Guy. “Flights to China are a perfect example. There are very few flights available right now, and the ones that exist have astronomically high prices.”

The Problem with Points

Due to a shortage of available seats on flights, consumers are facing difficulties in utilizing the millions of airline points and miles that they collected by using credit cards during the pandemic. Airlines generally allocate only a few seats for point redemption, and this proportion has continued to decline. Additionally, airlines have begun to devalue their points, as noted by Henderson, emphasizing that consumers should be on the lookout for infrequent opportunities to redeem their points.

Henderson advises consumers to act quickly when they come across a good deal, as these opportunities are scarce and fleeting. “These days, they don’t last long,” he added.

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