The usual correlation between higher air fares and lower demand might not play out in the current travel market, according to IATA chief economist Marie Owens Thomsen.
Higher fares are a hot topic in the industry as airlines face cost challenges on a number of fronts – crucially including fuel – amid rising inflation in many regions.
Speaking during an IATA media briefing on 6 April, Owens Thomsen describes the likely consumer response to higher fares as “a bit of a mystery” given the unusual position of much of the industry as the pandemic recedes.
“In the current environment, sensitivities on the customer side might be lower than usual,” she suggests.
That is partly because, in many cases, fares are starting from historically low levels as carriers emerge from the pandemic.
“Perhaps we need to come back to the historic price levels before this starts to impact passenger numbers,” says Owens Thomsen.
Furthermore, she cites “the seemingly intense desire to travel”, noting that “as soon as restrictions are eased or removed, we see an immediate response in the passenger numbers”.
That might mean passengers are more willing to accept the higher ticket prices, following two years of heavily disrupted travel plans.
Meanwhile,in terms of the wider strategic approach to cost challenges at airlines, Owens Thomsen says that “the best response” would be “to try to grow the business”.
A crucial factor in that regard is “how quickly the remaining [Covid-19] restrictions get lifted”, she says.
“If they come off, that will clearly be extremely helpful for airlines’ financial performance this year,” Owens Thomsen states.
