'Airlines Have No Control Over Airfare Prices': IATA Chief Economist

Geneva: Airlines have limited control over the prices they pay due to industry dynamics, according to Marie Owens Thomsen, Chief Economist and Senior Vice President for Sustainability at the International Air Transport Association (IATA). Speaking in Geneva, she emphasized that carriers face significant financial challenges, constrained by slim profit margins and fragile balance sheets.

Marie Owens Thomsen explained that airlines are ‘price takers’ because they lack influence over key upstream costs such as aircraft procurement and fuel purchases. 

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Airlines Face Financial Strain

"There are too few aircraft manufacturers and oil suppliers. Upstream, we are price takers, and downstream, we operate in a hyper-competitive environment where customers can compare fares from all airlines instantly. So, we always compete on price," the Chief Economist stated.

Rising Airfare Concerns Amid Market Growth

India’s rapidly expanding aviation market has sparked ongoing debates about airfare trends and calls for more affordable ticket prices. Addressing these concerns, Marie Owens Thomsen highlighted that while airfares have risen, they have not kept pace with inflation. An IATA study published in November found that air ticket prices have grown slower than the Consumer Price Index (CPI), while jet fuel costs have surged far ahead of inflation.

Jet fuel accounts for around 30 per cent of the airlines' operating expenses. It continues to be a major cost driver. Marie Owens Thomsen noted that administrative and regulatory fees also constitute a significant portion of the costs, leaving limited room for profitability.

Responding to questions about fare transparency,  Marie Owens Thomsen dismissed notions of airline profiteering. "If airlines were making excessive profits, the per-passenger profit would be much higher," she remarked. According to IATA’s latest outlook for 2025, airlines are expected to earn a net profit of just USD 1.8 per passenger, with an overall industry net profit forecasted at USD 3.6 billion.

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"You can have a high-activity market and still struggle with profitability due to an elevated cost base," Thomsen added, referencing the impact of regulatory charges and service fees.

While revenue diversification appears to be a logical step for airlines, Marie Owens Thomsen acknowledged that it is not easily achievable given the industry’s financial constraints. "We are squeezed between being price takers and having limited profitability," she said, according to reports.