Continued from page 48


the risks of rising interest rates, escalation of the war in Ukraine, strains in supply chains and rising regulatory costs including “regional environment initiatives”. O’Leary has acknowledged


fares will increasingly have to reflect the cost of carbon, saying: “Environmental taxation will become a feature of European air travel in the next five years” (Travel Weekly, May 25). That is before the price of sustainable aviation fuel – currently between 2.5 and six times the price of jet fuel – and other costs of decarbonisation are factored in. Iata director general Willie


Walsh warned last week: “Cost pressure is acute . . . [and] many of those we do business with are adding to these pressures. Supply chain blockages are raising costs, and there are grievous examples of airports and air navigation service providers shifting costs to airlines.” As examples, Walsh noted


air traffic management costs in Europe had risen €1.9 billion this year on 2022 and Amsterdam Schiphol had raised charges 12%. Wizz Air chief executive Jószef


Váradi reported last week: “Fares are increasing. [But] the industry is exposed to significant cost rises.” Crucially, rising interest rates


are increasing the cost of debt and driving up aircraft-leasing rates, a significant factor as many carriers, including easyJet, lease more of their fleets now than pre-Covid, having completed sale-and- leaseback deals with lessors to raise capital during the pandemic. The UK base rate, now 4.5%,


was 0.1% barely 18 months ago. The US rate, now 5.25%, was zero. Both are set to rise further, with O’Leary noting last month: “Some lease rates are now 8%-9%.” These rates inflate daily operating costs and won’t diminish until rates fall.


Iata doubles forecast for airline profits to $9.8bn


Ian Taylor


Airline association Iata hailed a collective return to profit by carriers at its annual general meeting in Istanbul last week and forecast an industry profit of $9.8 billion for the year, double the figure it had predicted at the turn of the year. Iata expects airlines’ operating


profits to be higher at more than $22 billion, seven times the December forecast, with passenger numbers expected to be close to the 2019 level of 4.5 billion. However, director general Willie


Walsh noted: “Airlines will make on average $2.25 per passenger [this year]. Clearly, that level of profitability is not sustainable. Repairing damaged balance sheets and providing sustainable returns will continue to be a challenge.” Iata members recorded losses of $183 billion during the pandemic-hit


Walsh demands reform of EU 261 compensation rule


Iata director general Willie Walsh has demanded Brussels review its regulation EU 261 on air passenger rights and slammed the US, Canada and other countries for introducing similar compensation rules. Walsh described EU 261 as


“a contorting contagion” which penalises airlines for disruption, telling the Iata annual general meeting in Istanbul: “The situation is no longer sustainable.”


46 15 JUNE 2023


year, with demand 16% higher year on year and capacity 5% up on 2019. Middle East airlines can expect


Willie Walsh


years of 2020-22. But Walsh noted losses for 2022 were lower than previously estimated at just $3.6 billion. There were substantial variations


by region. Carriers in Europe made an estimated profit of $4.1 billion last year and are forecast to make $5.1 billion this year off the back of a near 20% increase in demand and a 19% rise in capacity which should end the year just 2% down on 2019. North American carriers are


forecast to make $11.5 billion in profit this year, up from $9 billion last


He said the cost of EU 261


claims “continues to balloon” and urged a move to “shared accountability” for delays and cancellations. Walsh insisted: “Airlines are


singled out to pay compensation for delays and cancellations that have a broad range of causes.” Yet he claimed passengers see


“little benefit”, arguing: “Consumers are paying more to cover the cost of compensation because the costs need to be recouped, and EU studies show no improvement in delays or cancellations.” Walsh urged the UK government


to seize its chance for a “post-Brexit model for passenger rights”, arguing


Brussels


reform of the regulations provides “a gilt-edged opportunity for a genuine Brexit dividend”. The UK government has


proposed changes to rules on compensation for domestic flight delays and cancellations with payouts linked to the price of the fare.


travelweekly.co.uk


to record $2 billion in profit in 2023, up from $1.4 billion in 2022, with demand up 21% year on year but capacity still down 13% on 2019. However, carriers in the Asia-


Pacific region can only expect to halve their losses from $13.5 billion last year to $6.9 billion this, with demand still 29% down on 2019 and capacity 26% down. Airlines in Latin America are forecast to lose $1.4 billion and carriers in Africa $500 million, with capacity remaining narrowly down on 2019 in Latin America and 17% down across Africa. Iata forecast global airline revenue


would return to within 4% of the 2019 level this year at just over $800 billion, with passenger revenue contributing $546 billion – 10% below the 2019 figure – while capacity should reach 88% of 2019 levels.


PICTURES: Shutterstock/symbiot, Alegro Studio, Markus Mainka; Jules Beresford Photography


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