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VIDEO: Rising oil prices are only part of why airfares will rise soon

International Air Transport Association CEO Alexandre de Juniac discusses the impact of rising oil prices on the airline industry. He speaks from the Singapore Airshow Aviation Leadership Summit on “Bloomberg Markets.”

At end 2017, IATA announced that the airline industry would make $38.4bn in 2018 profits.

Would the increase in oil prices affect that?

“Let me clarify that the $38.4bn profit is only 4.7% of total revenues and as such a very small buffer to help cope with shocks which can come from many directions,” said Juniac.

Oil prices in the current $60-$70 range are higher than 2 years ago but lower than their highest at $100-$120, and at these levels, Juniac doesn’t foresee an impact on profits this year.

Watch: US crosses oil production threshold and predictions for crude prices

“If oil prices increase further, we can expect that ticket prices will reflect that increase,” he said.

“The crisis coming has to do with infrastructure which we see everywhere, in Asia Pacific, Europe, the US and the Gulf.”

He added that infrastructure has 2 elements: Lack of capacity, and sky management.

“Airports need to increase capacity and start now because this takes 5-10 years to implement, while sky management needs to be more efficient because we have problems with efficient managment of traffic between countries,” Juniac said.

“Governments need to be careful with privatization of airports which we notice increase costs on airlines and fares, and airlines should not pre-finance privatization projects.”

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