Global Airline Industry Remains Upbeat in Spite of the Rise in Fuel Price

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In this Op-Ed, Barrister Allen Onyema, Chairman and CEO of Air Peace takes a strategic look at the aviation sector in the wake of rising fuel costs.

The oil price surge over the past decade has greatly impacted the airline industry worldwide. The current price level of jet fuel is reportedly 36.5 percent higher than it was a year ago. This global phenomenon has long prompted stakeholders to take measures to offset rising operational costs.

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The adjustments in business plans and strategies to cope with higher jet fuel costs are only to be expected. In making dramatic overhauls, airline companies have taken into consideration key factors such as routes, flight capacity, and the needs of their target markets.

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In addition, industry experts remain upbeat in their outlook, citing critical reforms implemented to ensure that revenues stay within the expected and acceptable range despite the current market condition. Some airlines have tried to maintain the airfare cost at a reasonable rate so as not to lose passengers who simply cannot afford a hike. Others also offer good deals to attract passengers and boost ticket sales by providing them with an opportunity to save on their plane tickets in spite of the fuel hike.  

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Close monitoring of non-fuel expenses and dropping capacity when demand naturally decreases are critical measures at this stage as well. They help avoid unnecessary expenditures that might further add pressure on the bottom line.  Additionally, removing less profitable flights can help improve airline operations as well as effectively make both the supply and demand in sync with each other.

The industry growth is also forecasted to be significant, with the demand for seats on aircraft is only getting robust. The demand is expected to go up by 5 percent annually as per an online report. The same report noted that available seats on aircraft have grown by over 25 percent over the last 20 years, while the global fleet is forecasted to reach approximately 40,000 by 2032 to address public needs and requirements.  

Then there is a matter of using newer, more fuel-efficient aircraft equipped with the newest engine technology. Next-generation technological advancements and innovations have been playing a significant role in ensuring increased fuel efficiency in the industry. Leveraging their full potentials could mean considerable savings for airline companies.  Air Peace has been following this policy with its acquisition of newer aircraft, and also aims to purchase the rights for an additional 20 Embraer aircraft to keep up the positive momentum.

Furthermore, replacing the old with more efficient and modern aircraft is a step in the right direction and can be part not only of an organization’s fuel-saving initiatives but also its carbon footprint reduction efforts.  Responding to today’s mounting calls for environmental sustainability, airlines have moved to lessen their fuel consumption in part to reduce their carbon emissions.

The aviation industry’s demand for fuel is expected to continue its upward trajectory in the coming years. An online report revealed between 1.9 percent and 2.6 percent annual growth in fuel demand until 2025.

As oil prices remain volatile, airlines have no other recourse but to execute a strategic action plan that will help effectively shield them from future fuel cost increases.

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