The industry supposedly is committed to developing alternative, sustainable fuels. But a non-carbon substitute for jet fuel is still a long way off. Hence, the demise of Sunwing, combined with the possible loss in the near future of one or more recent entrants, and the very slow post-COVID recovery by Air Canada and WestJet, means airfares will continue to rise and eventually these higher prices will curb demand.
How can an airline reduce its costs? There’s not much it can do to reduce ownership and aircraft maintenance costs, although maintenance companies may eventually use big data and AI to become a lot more efficient. AndManagement costs are riper for the picking. Air Canada and WestJet could reduce their management levels and costs by at least 25 per cent and probably operate more effectively with better service for passengers.
Governments could help out by reducing taxes on jet fuel, and airlines could bring in competent people to develop hedging strategies against changing fuel costs. In the past, they have lost billions of dollars on their fuel hedges when fuel prices actually declined.