Airfares from Middle East may go up by 50pc due to social distancing: Iata
International Air Transport Association (Iata) said that average airfare in the Middle East region would jump by 43 to 50 per cent when airlines resume normal flights due to social distancing in the aircraft, Khaleej Times reported.
The global aviation body of around 200 airlines projected that the airfares in Middle East and Africa will increase from an average $181 (Dh664) to $259 (Dh950.5) if social distancing rules are maintained as airlines return to normalcy with the easing of restrictions on domestic and global air travel.
Similarly, it predicts a 43 per cent increase in North American airfares, 45 per cent for North Asia, 54 per cent for Asia-Pacific and 49 per cent for Europe.
“Airlines are fighting for their survival. Eliminating the middle seat will raise costs. If that can be offset that with higher fares, the era of affordable travel will come to an end. On the other hand, if airlines can’t recoup the costs in higher fares, airlines will go bust. Neither is a good option when the world will need strong connectivity to help kick-start the recovery from Covid-19’s economic devastation,” said Alexandre de Juniac, director-general and CEO of Iata.
Iata said airfares need to be hiked between 43 to 54 per cent to get breakeven if seat capacity is limited to 62 per cent. “Unit costs would rise sharply with fewer seats and zero profits assumed,” the aviation body said.
It also said competition potential is expected to be fierce when markets reopen despite consolidation. In addition, demand will also be low in the first few months of resumption of services by the airlines.
Mark Martin, CEO of Martin Consulting, said as a result of forced social distance, middle seats would be left empty and it will have undoubtedly impact airlines.
“Iata’s projection of 43 per cent is a sweet spot of accuracy. I believe it will be anywhere between 43 per cent to 70 per cent increase as we will be dealing with different load factors on different sectors. So, if an airline is going for a nine-hour flight with 50 per cent occupancy, they are still need to recover operating cost. We also looked at worst case scenario. For example, if it costs now around Dh2,000 to go from Dubai to san Francisco or LA with a minimal cargo, the cost of ticket should be least Dh7,000 to Dh8,000 due to social distancing. So, it is going to be very expensive,” Martin told Khaleej Times.
“Also, it depends on which sector you are flying. For Gulf carriers, Asia the market is where they make bread and butter as it is less than five hours of flight. There are going to be clearly tough times and we are not expecting occupancy coming at 70-80 per cent until we see substantial breakthrough in vaccines for the virus,” he said.