Photo: IATA The global aviation industry is facing one of the most significant challenges in recent years, amid a sharp jump in fuel prices, including jet fuel, and the closure of airspace in the Middle East and Gulf region.
The combination of the two factors leads to a sharp increase in operating costs, longer flight times, and schedule disruptions.
According to official figures, jet fuel prices have recently doubled or even more, forcing airlines to reexamine the structure and scope of their operations and the level of competitiveness. A strong hint of this could be found in the words of Scott Kirby, CEO of United, in the open letter he published yesterday.
At the same time, airspace closures in the Middle East region due to regional tensions require longer flight routes, further increasing fuel consumption.
In recent interviews given by Willie Walsh, CEO of the International Air Transport Association (IATA), and published on the organization's social media, he says that fuel costs constitute a major component of airline expenses, averaging about 27% of total costs.
According to Barry Walsh, when prices soar, fuel becomes the dominant component and sometimes exceeds 50% of expenses, putting the industry's profitability, which hovers around only 4%, at risk.
In this reality, airlines are expected to pass some costs on to consumers through higher ticket prices, along with adjustments to flight supply. Some companies are enjoying price protections in the short and medium term, but market uncertainty remains high, despite expectations of future price declines.
Although some Gulf airlines have managed to maintain partial operations of about 60% of pre-crisis levels, security instability continues to affect the industry. Industry sources compared the level of uncertainty to the beginning of the coronavirus pandemic, emphasizing that further developments will determine the depth of the impact.