THE two-week ceasefire between the US and Iran is "positive” the aviation industry, but jet fuel and ticket prices will remain elevated for some time, said Willie Walsh, the head of the airline industry’s global trade body.
"Even two weeks is a positive because we will see some flow of oil return,” Walsh, who will take over as chief executive officer of Indian budget carrier IndiGo later this year, said in an interview with Bloomberg Television.
However, jet fuel prices "will remain elevated for some time,” he said. "If crude has come down 16% you like to think jet will come down by a similar figure but it’s still going to be a high price, that will mean higher ticket prices. It is inevitable.”
Speaking in his role as director general of the International Air Transport Association, Walsh said the short-term risk of supply shortages still remains. Asia is most vulnerable, followed by Africa and Europe, he said.
Crude oil prices fell as much as 16% to below $100 a barrel Wednesday after US President Donald Trump announced the ceasefire with Iran, which agreed to open the Strait of Hormuz as as part of the deal. Still, it will take time for shipping to resume in earnest, with more than 800 vessels stuck in the Persian Gulf.
Carriers globally are grappling with a more than doubling of jet fuel costs since the war broke out, and the threat of supply shortages in some regions has forced some airlines to reduce services.
At an earlier IATA panel event, the chief executive officers of Malaysia Aviation Group and Thai Airways International Pcl said the impact on prices and supply concerns will remain.
"Even if the war stops, it’s going to take many, many more months for the price to stabilize,” Malaysia Aviation’s Nasaruddin Bakar said at the IATA event in Singapore.
Thai Airways CEO Chai Eamsiri said this is the worst oil shock in his near-four decade career.
"This is the worst one,” he said. "This time is about the infrastructure that was destroyed. It will take some time to call back all the supply, the facilities, the refinery, the infrastructure.”
Malaysian low-cost carrier AirAsia X Bhd
. earlier this week said it had increased fares as much as 40% and hiked fuel surcharges to cope with the price shock. In the US, United Airlines Holdings Inc. has trimmed roughly 5% of capacity. Air New Zealand Ltd. has pushed through a second round of cuts to flight schedules and further increased fares to manage with higher oil prices. - Bloomberg
