IATA economist warns airline finances will deteriorate if fuel prices stay high

Airlines will find conditions harder the longer jet fuel prices stay elevated, IATA chief economist and vice-president of sustainability Marie Owens Thomsen said. Carriers will need unusual solutions to withstand the pressures they face, she said in an interview at the IATA World Sustainability Symposium in Brussels on 13 October.

Airlines with the strongest balance sheets are best placed to absorb sustained higher costs. But there is a limit to how far ticket prices can rise, Owens Thomsen said, since households are seeing purchasing power fall as the cost of living climbs.

She declined to forecast the failure of any IATA member airline, but said conditions would become harder for carriers over the long run.

Jet fuel costs have risen sharply since attacks on Iran by the USA and Israel in late February and the subsequent closure of the Strait of Hormuz, a route used by about a fifth of the world's oil. Hopes that a fragile ceasefire would bring prices down from their initial peaks appear to be fading. Oil prices remain high, with no end to US-Iran tension in sight.

A strong balance sheet allows an airline to withstand significant hardship, Owens Thomsen said. The industry has never recorded a net profit margin above 5%, she noted, which has limited its ability to build the financial reserves needed to endure prolonged pressure.