Airlines say taxes and rules bigger worry than Mideast war

A plane is silhouetted as it takes off from Vancouver International Airport in Richmond, B.C., Monday, May 13, 2019. THE CANADIAN PRESS/Jonathan Hayward

RIO DE JANEIRO, Brazil -- Airlines are facing surging fuel costs from the war in the Middle East but executives say they are more concerned about taxes and regulations deemed too restrictive that could further crimp their bottom lines.

Despite hand-wringing over the risk that travellers will baulk at paying higher fares, the ongoing war did not appear to ruffle feathers at the International Air Transport Association’s annual conference in Rio, which ends Monday.

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“We expect average jet fuel prices to be 70 per cent higher year-on-year. That will add US$100 billion to our collective fuel bill this year,” IATA director general Willie Walsh told the gathering.

Yet when the CNN journalist Richard Quest asked a roundtable discussion if airlines were frustrated by “an event you have no control over,” the responses were remarkably subdued.

The chief of Turkiye’s Pegasus Airlines, Guliz Ozturk, noted wryly that it was standard practice for carriers to predict various scenarios at the beginning of the year, only to see something entirely different happen.

IATA chief economist Marie Owens Thomsen recalled the uncertainty generated at last year’s conference, held in New Delhi just weeks after U.S. President Donald Trump unleashed his tariffs war.

“We thought that it was the end of the world,” she said.

But this year, there was hardly any mention of Trump despite the ongoing Mideast war, which has driven up fuel prices and caused profitability to plummet in a sector that was already struggling.

Name and shame

The IATA, which represents 370 member airlines, focused instead on naming and shaming countries that have imposed taxes on tickets -- often in the name of reducing carbon emissions -- or increased regulations on the industry.

The European Union was the most frequent target, with Walsh taking aim at the bloc’s “populist” Parliament for defending higher compensation for passengers impacted by flight delays.

And at a press conference on the shortage of non-fossil fuels needed to decarbonize air travel, EU regulations on the minimum amounts of such fuels required in aircraft tanks came under fire.

Even when pressed on the potential impact of a “quagmire” scenario in the Gulf that would curtail oil and jet fuel exports for several more months, executives did not appear overly alarmed.

When asked about the possibility of the war dragging out for years, research director Eleanor Budds played down the risk.

“Quagmire is a scenario... It doesn’t mean we expect this to happen,” Budds said.

A reporter then asked if, in an extreme case, the war would not just drive up prices but also lead to shortages of jet fuel.

“In our base case we don’t have shortages,” she responded.

By Hugues Honoré, AFP