Willie Walsh, the former Aer Lingus and International Airlines Group (IAG) chief executive who is now director general of the International Air Transport Association (IATA), has warned that fares will rise as airlines implement measures to hit sustainability targets in coming years. He also warned that fares may rise in the short term this year as oil prices hit multi-year highs in 2022.
In a video interview with the Irish Tourist Industry Confederation (Itic) that will be circulated among its members on Wednesday, Mr Walsh heralded sustainable aviation fuel, a less environmentally damaging fuel mix that is blended with aviation's traditional fuel of kerosene, as a "game changer".
“The problem with [such fuel] is the cost,” Mr Walsh said in conversation with Itic chief executive Eoghan O’Mara Walsh.
He said the greener fuel was “2½ times as expensive” as traditional aviation fuel. Considering the proportion of a typical airline’s costs go on fuel – about 25 per cent – it is “clearly going to have an impact on price” as many airlines turned to sustainable fuel to help them hit carbon reduction targets, he said.
Mr Walsh called on governments to provide more incentives to airlines to “decarbonise” their operations. He suggested that State incentives to decarbonise road transport, which is “much easier” to achieve than reducing aviation emissions, should be redirected to the aviation industry.
IATA’s airline members last year approved a resolution at its annual meeting to achieve “net zero emissions” across the sector by 2050. It says 65 per cent of the reduction could be achieved by sustainable fuels.
Ryanair has already committed to using 12.5 per cent sustainable fuel by 2030, although its chief executive, Michael O'Leary, has warned that this will be hard to achieve. IAG, the parent company of Aer Lingus and British Airways, has committed €350 million towards the development of sustainable fuels.
Mr Walsh also said airfares this year would “clearly” be driven up by the price of oil, which on Monday hit a seven-year high. Some analysts have predicted it will soon cost more than $100 a barrel.
Mr Walsh said oil prices oil prices should taper off later this year, but would put pressure on airfares in the meantime.
He also questioned the effectiveness of many Covid-19 border control policies and noted that Ireland’s had been among the most severe in Europe, while the country also had high infection rates. But, he conceded, the Government was now being “more rational” and he saw a “positive” year ahead for the sector.
He also suggested that US carriers may be slow to rebuild their transatlantic route networks, which may provide an opportunity to Aer Lingus to capitalise.