The global aviation industry is benefitting from lower oil prices because they’re bringing down the cost of kerosene, the head of the IATA industry association said.
The reduction in oil prices is in turn helping drive down ticket prices, said Willie Walsh, the director general of the International Air Transport Association.
“It’s typically our single biggest cost, so it would help to offset any weakening demand if we were to witness a slowdown,” Walsh said in an interview with Bloomberg Television at IATA’s annual general meeting in New Delhi. “It also tends to have an impact on pricing. There’s almost a direct correlation between the price of oil and and the price of airline tickets.”
Airlines have become increasingly cautious about the demand outlook as global economic dislocations prompted by US President Donald Trump’s tariffs hurt demand. At the same time, a diminished economic outlook has also depressed oil prices, providing a cost advantage for carriers.
Walsh said that while lower ticket prices typically stimulate demand, it also “clearly drives down the overall revenue for the industry”.
Global aviation executives are meeting in New Delhi over the next few days to discuss the state of the industry. Walsh is set to unveil his formal outlook for profitability and revenue for the airline industry on Monday.
