Geneva, Dec 15 (PTI) Airlines are price takers as they do not have an influence on the prices they pay, IATA Chief Economist Marie Owens Thomsen has said and highlighted that carriers’ need to diversify their revenues is complicated by slim profit margins as well as weak balance sheets.
In a fast-growing aviation market like India where the air traffic demand is on the rise, there are persistent concerns about airfare trajectory and suggestions from various quarters to make air tickets more affordable.
Discussing overall airfares and the costs of airlines, Thomsen said airlines do not have any influence on the prices they pay.
“There are too few aircraft manufacturers and oil companies. Whatever supplies we are looking at upstream, we are price takers and downstream, we have the hyper competitive environment where all customers can see all fares from all airlines at all times. So, we always compete in price,” she told PTI in an interview in Geneva earlier this week.
Thomsen, who is the Chief Economist and Senior Vice President for Sustainability, said as airlines are price takers upstream and downstream, it leaves them with very little in the middle.
A study published in November by the International Air Transport Association (IATA) showed that airfares have risen at a slower pace than consumer prices (measured by the Consumer Price Index, CPI) over the past decade.
“This indicates that air ticket prices have not fully kept up with inflation, especially in comparison to jet fuel costs, which have significantly outpaced consumer inflation,” the study said.