Qatar Airways CEO: high oil prices ‘may’ trigger recession in aviation industry

The surge in energy prices over the past two years has been the largest since the 1973 oil crisis, the World Bank said.

Qatar Airways Chief Executive Officer Akbar Al Baker has warned about the airline industry possibly facing yet another recession as a result of the soaring oil prices triggered by the ongoing conflict between Russia and Ukraine.

“Once the cost of energy rises, then the cost to carry goods and passengers rises – all this also could start a second recession in our industry,” said Al Baker in an interview with aviation analyst John Strickland, according to the Gulf News.

Since the world saw the onset of the Russian invasion of Ukraine nearly three months ago, the aviation industry has been affected in many different ways. Airlines have been prompted to detour flights from dangerous air zones, leased aircraft have become stranded in Russia, and the Antonov An-225 has been wrecked.

The footage of An-225’s destruction in the first week of May circled around on Twitter by Illia Ponomarenko, a defence correspondent for the Kyiv Independent. Currently at the Kyiv Hostomel also known as Antonov Airport, the aircraft’s dire damage is presumably due to the impact of the shelling that befell Hostomel Airport in February.

“I hope I’m wrong, but we need to be prepared. We need to be on our guard too because anything could happen over the next 12-24 months. We also don’t know if this conflict will go beyond the borders of Ukraine,” Al Baker continued.

The nature of the conflict implies that long-term effects are also possible.

The Russian and Ukrainian conflict has had a direct impact on the world economy, with commodity prices experiencing a significant increase.

Oil prices will remain above $100/barrel so long as the conflict escalates further, an Economist Intelligence Unit global outlook report said.

The existing energy inflation further exacerbated by the conflict has caused oil prices to near a 100% gain, the highest level since 2008. As a result, this has the potential to prompt ticket prices to subsequently soar by as much as 15% this summer, according to reports.

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Aeronautical experts have gained knowledge from previous precedent set forth by the oil crisis in 1973, about the kind of impact a global energy shock can have on the industry. The situation experienced in 1973 as a result of the oil crisis forced airlines to make a range of strategic decisions with the “intention of saving fuel.” Carriers faced widespread cancellations, with the Dutch airline Lufthansa losing six percent of its total passengers, the report said.

Qatar Airways is now flying a longer distance to avoid Russian airspace when operating to the US, despite the Gulf carrier codesharing with the American Airlines. “When there are such calamities, passengers still want to fly from A to B and this is exactly what we do,” said Al Baker.

Further complications

Despite the gradual worldwide loosening of travel restrictions, China remains strict with its lockdowns on Shanghai. The government has also placed restrictions on airlines flying in and out of China, which was considered the world’s biggest commercial aviation market in 2020.

Al Baker said the lockdown in Shanghai was hindering cargo movements for the airline. “It’s affecting our business, because cargo is not moving due to the fact that there is a lockdown in the city,” he said.

“At the end of the day, it is the responsibility of the Chinese authorities to open or close their country and we will oblige by whatever decision is made by the authorities.”

Source: Doha News

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