Resumption and war make airfare prices soar 29.5% | Economy

Lucas Braga

Ukraine’s reopening and war cause airfare prices to jump 29.5% in one month

The combination of the war in Ukraine and the reopening of the economy has led to an escalation in ticket prices. From February to March, according to a survey by the National Civil Aviation Agency (Anac), there was a 29.5% increase in the real average fare.

In comparison with March of the previous year, the jump was 68.6%. It is a portrait, mainly, of the impact of the conflict in Eastern Europe on fuel prices and the return to the streets of Brazilians at the beginning of the year with the resumption of face-to-face activities.

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The rise in prices could slow the resumption of the airline industry, one of the most affected by the pandemic. For the consumer, it became more difficult to fit the value of the ticket in the budget.

Another indicator reinforces the trend. The average amount paid per kilometer flown, called in the jargon of the yield market, rose 31.2% from February to March. Compared to March 2021, the spike was 81%.

The scenario ahead is one of more turbulence in flight. Aviation kerosene (QAV) rose at the refinery this week, a move that should feed back into higher prices. Last year alone, fuel rose 91%. Until May 29, the accumulated high reaches 36.42%, without considering the ICMS, according to the National Petroleum Agency (ANP).

The price of fuel is linked to the dollar and represents about 40% of the cost matrix of a Brazilian airline. Oscillation in the wake of the war, reduced margins, and item weight make it difficult to hold the pass.

For the consumer, the way out is often to review plans. Content creator Levi Kaique Ferreira, 28, dropped out of traveling with friends to Florianópolis in November because of the ticket price and hotel rates.

— We saw a ticket price and thought about going, but soon after it went up. It would even split if the difference was small, but it is not. It’s very unstable. I don’t know how much the fuel went up. A ticket that I paid R$ 250 in January for the round trip from Campinas to Rio I find on the website for R$ 1,117 — he says, who makes this stretch every two months and the last time he chose to go by bus.

price sensitive demand

Passengers on regular commercial flights departing from Santos Dumont and Galeão airports, in Rio, bound for São Paulo airports (Guarulhos, Congonhas, Viracopos and Ribeirão Preto), paid BRL 614.18 for a one-way ticket in March. and return, 30% more than the average BRL 470.80 disbursed by those who flew in February and 172% more than in March 2019 (BRL 347.47).

From Santos Dumont, the route to Fernando de Noronha had the highest average price in March: BRL 1,404.22, a fare 56% higher than that charged in the same month of 2019.

According to André Castellini, a partner at consultancy Bain & Company, the demand for domestic flights at the end of the first quarter was marked by the aftermath of pent-up demand during the pandemic. For him, the recovery may still have breath in the high season months, but the rise in ticket prices can undermine demand in the months of lower demand.

“Part of this demand for tickets comes from people who postponed vacations or appointments during the pandemic and are now returning to travel, but this is limited. of Brazilians did not rise in proportion to the price of tickets”, he says.

For those who make travel plans, the way out is to research. The physical therapist Hanna Gomes has been following for a month the values ​​of the passage from Rio Branco, in Acre, to Rio, where she and her husband are going to visit the family and intend to attend the Coldplay concert, in October. The ticket, which ranged from R$1,000 to R$1,200 per person, is in the range of R$1,800 to R$1,900, according to her. Without visiting Rio since 2019, because of the pandemic, she waits for a truce to buy the ticket:

“I’m trying to see if I can find a more affordable price.”

According to Castellini, corporate travel, which has a higher average ticket and is more profitable for companies, has returned with more vigor this year, but is still a minority. For him, companies have been operating with reduced margins and there is no room to reabsorb higher costs.

“There is competition between aviation and other modes, especially road in leisure travel, which is once again the answer for consumers who cannot afford the new level of air fares. It is a choice based on price, similar to what some have needed do when choosing which meat to buy at the supermarket”, he compares.

For Márcio Peppe, lead partner in aviation at KPMG, the rise in ticket prices is global and should last as long as oil is high, but Brazil could be affected by the slowdown in economic activity ahead:

“Domestic demand for aviation is close to the level possible for an economy that is not strong, like Brazil’s.”