Airlines bask in sky-high fares while airports stay stuck
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Airlines bask in sky-high fares while airports stay stuck

FILE PHOTO: A Singapore Airlines Airbus A330-300 takes off behind a Boeing 787-10 Dreamliner at Changi Airport in Singapore, March 28, 2018. (Reuters)
FILE PHOTO: A Singapore Airlines Airbus A330-300 takes off behind a Boeing 787-10 Dreamliner at Changi Airport in Singapore, March 28, 2018. (Reuters)

Soaring ticket prices are lining the pockets of the world’s biggest airlines, providing balm to the economic wounds suffered during the travel lockdowns of Covid-19. But as the industry takes off, airports say they’ve been forgotten at the gate.

Flying will be far more expensive this (Northern) summer, according to corporate travel manager American Express Global Business Travel, which analysed tens of thousands of client transactions on international flights to and from Asian destinations. A typical New York-to-Hong Kong flight in economy class cost more than twice as much this year as in 2019, and almost a third more than last year.

Major carriers heading to this week’s annual meeting of the International Air Transport Association have enjoyed a quick recovery. Fares have been bolstered by tight capacity going into travel’s peak season and customers are eager to book, often upgrading to more expensive tickets. British Airways owner IAG SA posted a surprise quarterly profit last month and raised its outlook for the full year. Dubai’s Emirates and Singapore Airlines reported record earnings, with Australia’s Qantas on course to follow suit.

“Airlines have benefited unusually from the supply shortfall that boosts the price” of tickets, said Bloomberg Intelligence analyst Denise Wong.

Airports, meanwhile, continue to struggle, lacking the same flexibility to raise prices on fees and tariffs that are fixed, regulated or commercially negotiated. London Heathrow, the home base of BA, has warned of ongoing losses and is withholding dividend payments to its owners. 

Dublin Airport is also wrestling with regulators and airlines on the increase in fees it can charge airlines. Irish low-cost powerhouse Ryanair Holdings Plc, a major tenant, routinely threatens to leave over such costs. The discount carrier has also scaled back in Germany, saying high airport fees there make operations unsustainable at airports like Frankfurt.

Airports, on the other hand, say a divergence of fortunes is holding back investment, after staff shortages and other snafus caused backups that ruined many travellers’ vacations last summer. From terminal expansions to runway extensions, electrification and the installation of upgraded scanning devices, airports are continuing to pour resources into their facilities. 

“The sharp increase in airfares is hampering the recovery of the entire aviation ecosystem,” said Airports Council International Asia-Pacific, a trade group representing 132 companies across 623 facilities in Asia and the Middle East. Many of of its members have lost money for 10 consecutive quarters. The group said it wants carriers to “exercise responsible and fair” pricing that supports the travel recovery and consumers’ best interests.

The frequent jousting over airport landing fees has intensified in the wake of the health crisis. Airlines received more direct financial support during the pandemic, and now have the freedom to quickly raise prices. IATA Director General Willie Walsh has lobbied fiercely to prevent tariff increases from endangering their recovery.

Heathrow has sought backing from Britain’s Civil Aviation Authority to raise fees, saying any higher costs shouldn’t be borne by travellers but instead shared between the airlines and the airport. Critics of higher fees, like Virgin Atlantic, have said such a move would only benefit the airport’s mainly foreign shareholders, and represent a bad deal for consumers and airlines.

Animosity between airports and airlines boiled over last year when Heathrow imposed a cap of 100,000 departing passengers a day through much of the summer schedule amid a lack of workers. The move drew the wrath of airlines including Emirates, which flies about half a dozen Airbus A380s into the UK capital each day and said in July that Heathrow “chose not to act, not to plan, not to invest.”

“There is always a bit of a tension between the two, which is typical between a supplier-customer relationship,” said Mabel Kwan, a Singapore-based managing director at aviation consultancy Alton. Airlines are “a very powerful customer and client from a negotiating standpoint,” and fee increases “are politically and socially sensitive,” she said.

Airports also earn revenue from commercial rents, advertising and other items often dependent on volumes, which have varied across the global recovery.  

A record summer

In the background of the rift is a peak travel season just getting under way — in Asian countries such as China, international flights have recently reopened after tighter Covid restrictions. Airlines, airports and ground-services providers have held meetings and turned on the hiring spigot to avoid the disruptions that took place in Europe and the US last year. 

However it unfolds, travellers will be paying more. Economy and business-class passengers on the most in-demand corporate routes are seeing higher prices this year, Amex GBT’s analysis showed. 

“We expect air fares to continue to rise this summer,” said Jeremy Quek, principal global air practice consultant for Amex GBT. “The level of increases will moderate a little as airline capacity recovery continue to grow through the second half of 2023.” 

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